A General Interest Charge (GIC) is a punitive charge imposed by the ATO in situations where primary tax owed is not paid by the due date or where there is an underpayment of tax following a review or audit amendment to an assessment.
Most commonly individuals and businesses are hit by GIC in circumstances where they have failed to lodge an income tax return or business activity statement by their due date and there is a tax payable.
The charge is intended to encourage timely payment, to deny later payers any unfair financial advantage to taxpayers who pay on time and to compensate the government for the economic impact of the late payment.
GIC is calculated on the amount of primary tax owing at a daily compounding rate until it is paid and depending on how big the primary amount is and how long it’s been overdue, GIC can be significant. The current GIC annual rate is 8.00%. While you may claim a tax deduction for GIC it is still an economic cost.
Applying for a remission of GIC
You can apply to the ATO to remit all or part of the GIC. Even if you have already paid the GIC, this should not impact the Commissioner’s decision to remit and issue a refund.
The Commissioner has discretion to remit GIC in circumstances where it would be fair and reasonable to do so. Under the Taxation Administration Act 1956 (Cth) when deciding to remit GIC the Commissioner must have regard to all of the facts and circumstances of the particular case, and he must be satisfied that:
- the circumstances that contributed to the delay in payment was not caused by the taxpayer and, the taxpayer has taken reasonable action to mitigate, or mitigate the effects of, those circumstances; or
- the circumstances that contributed to the delay in payment was caused by the taxpayer, and the taxpayer has taken reasonable action to mitigate, or mitigate the effects of, those circumstances, and having regard to the nature of those circumstances, it would be fair and reasonable to remit all or a part of the charge; or
- there are special circumstances relating to the taxpayer’s case and because of those circumstances it would be fair and reasonable to remit all or a part of the charge or it is otherwise appropriate to do so.
The Commissioner will also take into account:
- the taxpayer’s previous compliance history (in respect to all tax obligations) – i.e. has the taxpayer generally lodged and paid all of its tax obligations as and when they fall due?
- if the taxpayer has paid all outstanding amounts owed at the time of requesting remission;
- what action the taxpayer has taken to mitigate the circumstances which resulted in the outstanding payment; and
- any other circumstances that the taxpayer can show that contributed to the late lodgement and underpayment.
When and how to apply for remission of GIC
ATO Practice Statement Law Administration 2011/12 (PSLA 2011/12) outlines when and how you can apply for a remission of GIC at any time. However, the onus is on the taxpayer to satisfy the Commissioner that remission of GIC is warranted taking into consideration the above factors.
The request can be made over the phone or in writing. However, in our experience, written submissions are typically more successful than verbal as you are able to provide the requisite level detail and evidence required to prove your case.
Circumstances the Commissioner will consider:
The following list are some circumstances where the Commissioner may remit GIC. When asking the Commissioner to remit GIC it is important to explain how these events impacted your ability to pay on time:
- significant delays in receiving third party information such as your health insurer failing to provide you with your Private Health Tax Statement, and you’ve made reasonable attempts to attain the information;
- serious health issues with key personnel of a small business or of a family member of said personnel which required significant time away from the business to care for them;
- a natural disaster such as the most recent floods, drought or a fire and this impacted your ability to access business records required to determine your tax position;
- ongoing pre-lodgement review or an audit of a related entity which would have a flow-on affect to your personal tax position. For example, if your family trust is being audited and the outcome will impact the distribution you would receive; and
- if the taxpayer has good compliance history and can show the late payment was an isolated event.
When requesting the remission it is beneficial to provide as much detail as possible as well as any evidence to support your case.
How HopgoodGanim Lawyers can help
HopgoodGanim can provide advice in relation to your prospects of getting GIC remitted as well as assist with drafting submissions to the Commissioner for the remission of the GIC.
Our taxation team is experienced in drafting submissions for the remission of GIC as well as remission other tax penalties imposed.
If you would like further information or to discuss your circumstances, please contact our taxation team.