Written byThe general interest charge (GIC) is the interest the ATO adds, compounding daily, to any tax debt that stays unpaid after its due date.
Also known as: GIC, general interest charge, ATO interest, ATO general interest charge
Key points
- The rate resets each quarter at a fixed margin above the 90-day bank bill rate, which puts it well above most secured business lending.
- Since 1 July 2025 GIC is no longer tax deductible, so it is a real cost with no offset at return time.
- It applies to income tax, BAS amounts, PAYG instalments and the super guarantee charge alike, and keeps running through a payment plan.
- The ATO can remit GIC in some circumstances, but you have to ask and show why the delay was outside your control.
How GIC works
GIC starts the day after a tax amount was due and runs until it is paid. It is calculated daily and compounds, so each day's interest is added to the balance and earns interest itself, which is what makes an old tax debt grow faster than most people expect. The rate is published quarterly and applies uniformly to income tax, activity statement debts, instalments and most other amounts the ATO collects.
Where an assessment is amended and extra tax is owed, a separate shortfall interest charge covers the period before the amendment, and GIC takes over from the new due date. Both show as line items on the ATO account, next to the tax they relate to.
GIC and deductibility
Until mid 2025 businesses could claim GIC as a deduction, which cut its real cost. That ended: GIC and shortfall interest incurred on or after 1 July 2025 cannot be deducted, regardless of which year the underlying tax debt belongs to. Interest incurred before that date remains deductible in the earlier year.
The practical effect is that tax debt is now among the most expensive debt a business can carry. Interest on a business loan used to pay tax remains deductible as a cost of running the business, which has changed the arithmetic for owners with an ATO balance.
Tax debt and business finance
Lenders treat ATO debt as a warning sign, and a large debt that is not under a payment plan can be reported to credit reporting bodies. It has to be disclosed on a finance application, and an assessor will want to see either that it is being paid down on an arranged plan or that the new finance clears it. Some lenders write loans specifically to pay out tax debt.
Whether borrowing to clear a tax debt makes sense depends on the loan's rate and fees against the GIC rate, and on cashflow. What never helps is not lodging: the failure to lodge penalty is separate from GIC, and lodging on time while arranging to pay later keeps the ATO's hardship and payment plan options open.
Example
A concreting contractor in Rockhampton falls behind on two quarterly BAS after a big customer pays late. GIC accrues daily on the unpaid amounts, and although he arranges a payment plan with the ATO, the interest keeps running underneath it and none of it is deductible. His accountant runs the numbers on an unsecured business loan that would clear the ATO balance in one payment. The loan rate is lower than GIC, its interest is deductible and the repayments are fixed, so his broker arranges it and the ATO account is back to zero before the next BAS falls due.
Not to be confused with
- Penalty interest
- penalty interest is charged by a lender under a loan contract, while GIC is charged by the ATO on unpaid tax
- Default interest
- default interest is a lender's higher rate after a missed repayment, not an ATO charge
Frequently asked questions
How is GIC calculated?
Daily, on the outstanding balance, at an annual rate the ATO sets each quarter by adding a fixed margin to the 90-day bank bill rate. Because it compounds, each day's interest is added to the balance and attracts interest itself. The current rate and the historical rates are published on the ATO website.
Is the general interest charge tax deductible?
Not any more. GIC and shortfall interest charge incurred on or after 1 July 2025 cannot be claimed as a deduction, whatever year the tax debt relates to. GIC incurred before that date stays deductible in the year it was incurred. If the ATO later remits any of that GIC, the remitted amount is not income.
Does GIC still apply if I'm on a payment plan?
Yes. A payment plan stops the ATO taking recovery action while you keep to it, but GIC continues to accrue on the unpaid balance until it is cleared. The plan's instalments have to cover the interest as well as the debt, which is why paying a tax debt out early, or refinancing it, can cost less than stretching the plan.
Can I get GIC remitted?
You can ask. The ATO may remit GIC where the delay was caused by circumstances outside your control, such as serious illness or natural disaster, or where the ATO itself caused the delay. It is less likely to remit where the debt was not paid. Requests go through the ATO online services or your tax agent.
Is it cheaper to borrow to pay a tax debt?
It can be, because GIC is set well above typical secured lending rates and is no longer deductible, while interest on a loan used to pay tax generally is. Whether it stacks up depends on the rate and fees of the loan on offer and how quickly the tax debt would otherwise be cleared. An accountant can run the comparison.
Related terms
ATO
The ATO is the Australian Taxation Office, the national tax authority that collects income tax, GST and PAYG, administers superannuation rules, issues rulings and enforces compliance.
Read definitionBusiness activity statement (BAS)
A business activity statement (BAS) is the form a GST-registered business lodges with the ATO, usually quarterly, to report and pay GST, PAYG withholding and PAYG instalments.
Read definitionPAYG
PAYG means pay as you go: the ATO system for collecting income tax during the year, withheld from wages by an employer or paid in instalments by a business.
Read definitionCompound interest
Compound interest is interest calculated on both the original principal and the interest already added in earlier periods, so balances and debts grow faster than with simple interest.
Read definitionPenalty interest
Penalty interest is interest charged on an overdue amount by a revenue office, court or creditor to compensate for late payment and deter delay.
Read definitionBusiness loan
A business loan is finance for business operations, capital expenditure or growth, repaid with interest, either over an agreed term or as a revolving limit you draw and repay.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.