It’s easy to fall behind in your business tax affairs for various reasons. When it comes time to bring outstanding ATO returns up-to-date, it is disheartening to see the interest and penalties piled on by the ATO. There are ways to help you reduce your interest with the ATO, such as a General Interest Charge Remission.
A General Interest Charge Remission is a reduction or cancellation of interest or penalties. A request must be lodged with the ATO, and they will decide whether to grant you the waiver or reduction in General Interest Charges.
The ATO is taking steps to improve compliance and debt recovery, as well as receiving new powers to do so. It is important to note you only have one chance to request a remission of penalties and interest.
If your request is rejected by the ATO, a court application is required for further review. Therefore, it is important to engage an Accountant or Tax Debt Professional to assist with your remission request.
When will the ATO grant a remission of general interest and penalties?
The ATO has broad discretion to grant a request for a General Interest Charge Remission (often referred to as GIC).
For instance, the ATO will grant a remission of the interest charged to your personal income tax account, integrated client account (GST and PAYG) or superannuation guarantee charge (SGC) account, if the circumstances were not caused by you.
- The director or key person has experienced severe illness.
- Illness or injury causing significant loss of income to an individual.
- Industrial action.
- The business has experienced a major bad debt or the loss of a key customer to insolvency.
- Natural disasters.
- Other special and extenuating circumstances to businesses or individuals.
If you were responsible for the delay in lodgement or payment of the outstanding debt, the ATO will consider whether it is fair and reasonable to agree to your remission request. It is difficult to predict the ATO’s response as various factors (discussed below)are taken into account.
Penalties for failing to lodge on time may also be remitted. The ATO often look favourably on such requests. Especially if there are valid reasons causing a lodgement delay, or an issue preventing your accountant from lodging on time.
What you can do to improve your chances of remission
Taxpayers often expect that the ATO should grant a remission request for them, bring their outstanding lodgements up to date and enter a payment arrangement. However, the ATO does not see it that way.
The ATO considers that granting you a GIC Remission would be rewarding you for merely doing what is required. This could provide an advantage to you in comparison with other businesses who have lodged and paid on time.
There is a level of discretion and inconsistency with how the ATO’s representatives apply their policies. The following are also considered when reviewing a remission request:
- Your compliance history with both lodging and paying
- Whether the ATO has commenced legal action against you for an outstanding debt
- Whether you have paid the primary debt in full
- How long the debt has been outstanding
- Whether refusing the remission request would cause you hardship
To improve your chances of a General Interest Charge Remission, you should;
- Maintain your lodgements regardless of whether you can pay
- Keep in touch with your accountant and seek assistance if you’re feeling overwhelmed with your ATO or business issues
- Engage with the ATO early to enter into an affordable payment arrangement if required
- Understand the potential additional interest charges and propose a payment arrangement at the time of lodgement. Avoid ATO legal action being taken such as a garnishee notice, director penalty notice or statutory demand and winding up proceedings.
How we help with ATO debt relief
At Tax Debt Resolved, we assist clients who;
- Have lodged a number of outstanding ATO returns with a resulting debt.
- Have had trouble getting a General Interest Charge Remission request granted by their Accountant.
- Are subject to ATO legal enforcement action.
Failing to have proper arrangements in place at this time can lead to an ATO garnishee notice, director penalty notice, insolvency and/or liquidation. These are all best avoided.
If you are stressed about your tax situation or need help getting your financial affairs back on track call us now on 1300 628 586.
For more information on tax debt solutions, check out our tax debt page.