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Annual rates for GIC and SIC rise by almost a percentage point.
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ATO interest charges outpace RBA rate rises
21 June 2022
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The ATO has raised rates on both its general interest charge and its shortfall interest charge by almost a whole percentage point each, moving them ahead of the RBA’s rate rises in May and June.
The GIC rate rises from 7.07 per cent to 8 per cent for the July to September quarter while the SIC goes from 3.07 per cent to 4 per cent for the same period.
These increases come after the RBA raised the cash rate by 50 bps two weeks ago to 0.85 per cent, following a 0.25 per cent lift in May.
Both ATO rates are determined by a formula in the Taxation Administration Act 1953 that relies on the 90-day bank bill rate, rather than the RBA cash rate.
The GIC rate is calculated by adding 7 percentage points to the average bank bill base rate for a specified month in the preceding quarter. For example, to determine the rise from 1 July the ATO used the 90-day bank accepted bills for the preceding May.
The formula for calculating SIC is also found in the Act, and uses the base interest rate, the 90-day bank accepted bill rate and an uplift factor of 3 per cent.
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The GIC applies to late or unpaid tax liabilities, or excessive shortfalls in incorrectly varied or estimated income tax instalments.
The SIC applies when a tax return is amended and the tax liability increases resulting in a tax shortfall.
The ATO typically applies the SIC rather than the GIC when taxpayers would be unaware of the shortfall amount until they receive an amended assessment.
However, GIC applies to the original assessment to any tax shortfalls and associated SIC from their due date if the tax is unpaid.
This due date is 21 days after the ATO issues the notice of the amended assessment.
SIC is also applied to amended assessments for petroleum resource rent tax from 2006 to 2007 onwards.
This is the highest the GIC and SIC rates have been since before the pandemic, when they were at 8.54 per cent and 4.54 per cent in July to September 2019 quarter.
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