Have your say on the GIC squeeze

At a glance

• The Taxation Ombudsman is reviewing the ATO’s general interest charge (GIC) remission decisions.
• GIC is no longer tax-deductible, increasing the cost of late tax payments.
• The IPA is seeking member feedback for its submission to the Ombudsman’s review.

The Taxation Ombudsman recently announced her anticipated review into the ATO’s decision making in relation to the remission – that is, reduction – of the general interest charge (GIC) imposed on tax debts.

At the same time, the ATO is conducting a review into its approach to taxpayer relief provisions, which include remissions of interest. The consultation paper contains the following data, which underscores the amount of money at stake:

Total value of GIC imposed and remitted

So how does — or should — the ATO decide who is worthy of remission? What are the statutory or administrative protocols?

The law

Section 8AAG of the Taxation Administration Act 1953 empowers the Commissioner to remit all or part of the GIC.

Where the GIC liability arises because there is an unpaid amount after its due date, the Commissioner may only remit when at least one of the following is true:

• The circumstances of the late payment are not due to the taxpayer, and the taxpayer has taken reasonable action to mitigate those circumstances.
• The circumstances of the late payment are due to the taxpayer – but the taxpayer has taken reasonable action to mitigate those circumstances and, having regard to the nature of those circumstances, it would be fair and reasonable to remit all or part of the GIC.
• There are special circumstances because of which it would be fair and reasonable to remit all or part of the GIC.
• It is otherwise appropriate to remit.

The ATO guidelines

PS LA 2011/12 provides guidelines to internal staff on when remissions of GIC may be appropriate. The document considers each of the circumstances set out in section 8AAG. The guidelines provide commentary on each of the circumstances and include four practical examples.

Specific remission policies apply to eight particular situations. For example:

• GIC should generally not be remitted in a bankruptcy or liquidation situation where a GIC claim is included in a proof of debt.
• GIC should generally be remitted where payment cannot be made because probate has not been granted.

Whilst PS LA 2011/12 has been in existence for some time, economic conditions can also at times influence ATO policy on GIC remissions. For example, during COVID and thereafter the ATO applied a more lenient approach towards remission requests. It is appropriate that the ATO review its existing framework for remissions, particularly in light of its now more affirmative approach towards remission requests.

Non-deductibility of GIC

GIC incurred from 1 July 2025 is no longer tax-deductible. The GIC currently sits at a rate of nearly 11 per cent per annum, and is calculated at a benchmark Reserve Bank rate plus a seven per cent uplift. The abolition of the tax deduction without a change in the legislated interest rate will greatly increase the cost of a late tax payment. In addition, the ATO has publicly stated that it will take a stricter approach to interest charge remission and debt collection.

The Taxation Ombudsman’s review is timely, given the impending greater burden on taxpayers who miss a payment deadline. Deliberate and malicious non-compliance should never be tolerated. But the imposition of interest at punitive rates needs to be administered fairly and transparently, with outcomes which are proportionate to the mischief and intent.

Further details about the Tax Ombudsman review

The Tax Ombudsman will examine whether the ATO’s GIC decisions are:

• consistent with the law
• meeting community expectations
• meeting the principles of good tax administration, and
• supporting taxpayers with empathy and respect.

The review will examine the following:

• Is the ATO clear in its policy, communications and guidance to staff and the public about how it considers GIC remission requests?
• What is the reason behind the ATO’s recent decision to tighten up its remission of GIC and the intended outcomes?
• Are remission decisions fair and reasonable, and are they made consistently for taxpayers in like circumstances, regardless of whether they are represented or unrepresented? And are individual circumstances taken into account?
• Are taxpayers given adequate reasons for the ATO’s decisions not to remit interest?
• Does the interaction between GIC remission and payment plans support fair outcomes?
• Are there opportunities to improve GIC remission systems and processes, in light of the growing cost impact on taxpayers?

The Tax Ombudsman will be hosting three upcoming webinars in relation to the review.

IPA submission: we want your feedback

The IPA will be making a submission to the Taxation Ombudsman’s review. We invite you to send us your feedback, suggestions and anecdotes to ipaadvocacy@publicaccountants.org.au by Friday, 3 October 2025.