Compliance
General interest charge (GIC)
The general interest charge is interest the ATO applies to unpaid tax debts and some late amounts. It is calculated daily, and the rate is set by the ATO and changes regularly.
The general interest charge, usually called GIC, is the main interest charge the ATO applies when a tax amount is not paid by its due date. It applies to a wide range of debts, including unpaid GST, PAYG withholding, PAYG instalments and some income tax amounts, as well as some amounts arising from corrections and shortfalls. It is designed to remove the advantage a person would otherwise get from holding on to money owed to the government.
GIC accrues daily from the due date until the debt is paid in full. It is compounded daily, so interest is charged on any unpaid GIC as well as the original amount. The rate is worked out under the law by reference to a benchmark market rate plus an additional percentage, and it is updated each quarter. Since the rate varies, check the ATO website for the current figure rather than assuming an old one.
For GST, GIC can arise in several situations. The most common is when a BAS is lodged on time but the payment is not made by the due date. It also applies when a BAS is lodged late, as the GST is treated as owing from the original due date. If an amendment later shows that too little GST was paid in an earlier period, GIC may apply to the shortfall from the original due date, although voluntary corrections can sometimes lead to lower charges.
A GIC is different from a penalty. A penalty is a charge for breaking a rule, such as lodging late, while GIC is interest on an unpaid amount. Both can apply at the same time. Taxpayers can request remission of GIC in certain circumstances, such as when the delay was caused by an ATO error, a major disaster or other factors outside their control, and the ATO may decide to reduce or remove the charge.
Entering a payment plan does not stop GIC. Interest generally continues to build while the debt is outstanding, although the ATO may have the discretion to reduce interest in some arrangements. This is one reason to pay as much as you can as early as you can, even if the balance cannot be cleared immediately. Reducing the principal reduces the daily charge.
The tax treatment of GIC itself, whether it can be claimed as a deduction, has been the subject of legislative change, so it should be confirmed with the ATO or a tax professional for the relevant year. Also, credits and refunds owed to a taxpayer can attract interest in the other direction, but those rates are separate. Keep records of ATO account statements to track what has been charged.
This page is general information only. Confirm how GIC applies in your situation with the ATO or a registered tax professional.
Worked example
A business lodges its quarterly BAS on time showing GST payable of $11,000, but pays nothing until 40 days after the due date. The ATO applies GIC to the $11,000 for each day it is unpaid, at the rate for the relevant quarters, compounding daily. If the daily rate worked out to about 0.03%, the charge would be roughly $11,000 multiplied by 0.0003 for each day, which is about $3.30 per day.
Practical tips
- Pay as much as you can as early as possible, because GIC is calculated daily on the outstanding balance.
- Ask for remission if the delay was caused by an ATO error or events outside your control.
- Check the current GIC rate on the ATO website, since it is updated regularly.