The ATO has just set up a new regime for General Interest Charge remission requests. Chartered accountant GAIL FREEMAN explains the process…

Tian didn’t lodge and pay his business tax on time and has been charged a penalty and interest. He wants to know if there’s anything he can do about it.

I told him that, interestingly, the tax office had just set up a new regime for General Interest Charge remission requests. 

“If we prepare the remission request for you, there is now a special form for GIC remission for tax agents to use,” I said.

“It has the usual details, namely my details and then your details. The first question is: ‘What circumstances/events caused the delayed payment resulting in general interest charges?’. 

“The ATO states that not only do they look at the circumstances of the late payment, but they will also consider whether it is fair and reasonable to remit the penalty.” 

I told Tian that the ATO gives a couple of examples in the instructions. 

In the first example, the taxpayer had their office flooded and they had to relocate the business, which is why the payment was late. In this case the GIC was remitted. 

However, in the other example, the company had unpaid BAS’s due to their cash flow being impacted initially by covid and then by increased costs of materials and higher interest rates. The ATO declined to remit the GIC as most other businesses were also impacted by the general economic downturn. 

“So you need to make sure your circumstances were unique rather than general,” I said.

Tian felt his circumstances were unique.

I told him the next question was: “How did this delay the payment on time?” 

“The ATO says that you need to explain how the circumstances impacted your financial position,” I said.

“The last question asked is: ‘What steps were taken to relieve the effects of the event/circumstances?’ The ATO states that you need to show what reasonable steps you took to reduce the impact of the event causing the delayed payment. 

“For example, did you attempt to take out a loan or sell some assets? “The ATO further advises that if the circumstances were beyond your control and you had taken all reasonable steps, then they would consider remission. 

“However, if the circumstances were not beyond your control but you have taken mitigating steps, the ATO will consider whether it is fair and reasonable to the community to remit the GIC.”

It was different in the case of penalty remission, I said. In that case the ATO considers a taxpayer’s compliance history, the size of the debt and the reason why the ATO imposed a penalty. 

“So you really need to be able to demonstrate that you have a good tax history,” I told him.

Tian said he could provide me with information to illustrate the special circumstances. 

“Just one more question, if I may?” he said. “I tried to lodge my tax return and it said ‘unfinalised income statement’. Do I need to do anything?”

I explained that it meant his employer had not finalised the payroll for the year and by lodging a return before the payroll was finalised there was a risk it could change if an error was found. 

As the July 14 deadline had passed, I suggested he contact his employer for clarification.

If you need help with GIC, penalties, wages or any tax-related matter, contact the experts at Gail Freeman & Co Pty Ltd on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.