Late payments from clients aren’t valid excuses for overdue ATO bills under guidance released Thursday. We break down when the tax office will actually waive interest charges on tax debt.
What’s happening: The Australian Taxation Office released updated guidelines on 22 January 2026 clarifying when businesses can request remission of General Interest Charge penalties on late tax payments.
Why this matters: With GIC becoming non-deductible from 1 July 2025, the financial impact on small businesses facing tax debts has significantly increased.
Late payments from a creditor or unexpectedly poor trading conditions are no excuse for overdue payments to the Australian Taxation Office, according to new guidelines for General Interest Charge remissions.
The GIC is a financial penalty levelled on tax payments that go unpaid after their due date, encouraging the prompt payment of outstanding debts.
The ATO has the power to remit GIC in extenuating circumstances. But some tax agents fear it is becoming harder to secure a remission, or understand the logic behind the tax office’s decisions. To assuage some of those concerns, the ATO on Thursday shared details about the remission request process, in the hopes of helping taxpayers and tax agents understand when those charges are likely to be waived away.
To request a remission of GIC or SIC, visit How to request a remission of interest and failure to lodge penalties.
Standardised forms required
From 22 January 2026, taxpayers and tax agents must use designated ATO forms for remission requests. Registered tax and BAS agents need to submit forms through the ATO’s online services for agents using practice mail, whilst businesses can use secure mail in online services for business.
CPA Australia tax lead Jenny Wong said the changes appear to respond directly to long-running issues raised by the Inspector-General of Taxation and Taxation Ombudsman.
“We support efforts to improve transparency and consistency, but ongoing monitoring will be critical,” Wong said in a statement. “These changes must result in fairer outcomes for taxpayers, not just more paperwork or more rigid processes.”
The standardised approach comes after the Tax Ombudsman launched a review into the ATO’s administration of GIC remission following a sharp increase in complaints. The review examines perceptions of a tighter ATO stance, limited visibility over how decisions are made, and differing outcomes across ATO channels.
According to the ATO’s updated guidance, taxpayers need to complete separate forms for each penalty or interest type, such as GIC, Shortfall Interest Charge, or Failure to Lodge penalty. The forms guide applicants to provide the information required for decision-making and aim to reduce the need for additional follow-up.
What qualifies for remission
The guidelines state the ATO may remit GIC if the late payment was caused by a natural disaster affecting their business or their tax agent, or if key personnel within a small business suddenly became ill.
According to the ATO’s documentation, circumstances that would likely be declined include adverse business conditions or economic downturns. The ATO provided an example where ABC Co supplied documents detailing their circumstances during the pandemic and requested GIC remission. The request was declined, as the general economic downturn also impacted the broader business community, most of whom still paid on time.
When deciding remission requests, the ATO considers whether the taxpayer was responsible for the delay in payment, if it was outside their control, and whether it’s fair and reasonable to remit the GIC if the taxpayer was responsible.
Generally, remission requests are considered more favourably if the late payment is out of pattern with otherwise on time lodgement and payment behaviours over the last several years. When the GIC amount is relatively low, such as $2,500 or less, positive compliance history will strongly influence the remission decision.
For GIC requests, taxpayers need to explain in detail the circumstances, including relevant dates that led to the delay in payment and any steps taken to reduce the delay. Supporting evidence might include medical certificates, letters from tax professionals, financial statements, police reports, outcomes of court proceedings, or letters from financial institutions.
Non-deductible from July
Wong emphasised that these issues have become more pressing with the change to the tax treatment of GIC from 1 July 2025.
“With the GIC now non deductible, the financial impact of ATO decisions is much more significant for small businesses and individuals,” she said. “That makes it critical that remission decisions are fair, predictable and clearly explained, especially where taxpayers have made genuine efforts to comply.”
GIC incurred on or after 1 July 2025 cannot be claimed as a tax deduction. As the interest incurred after this time is not deductible, any GIC that is later remitted doesn’t need to be included as assessable income in tax returns.
According to business finance experts at Valiant Finance, the current GIC rate sits at approximately 11.17% compounding daily. With unpaid tax debts from small businesses surging to $35.2 billion by the end of 2024, the removal of tax deductibility means businesses will feel the full impact of that rate from July onwards.
CPA Australia highlighted that the ATO has described the reforms as interim, pending a broader review of taxpayer relief provisions. That review is running alongside the Tax Ombudsman’s inquiry, which is due to report in early 2026.
For businesses unable to pay tax debts in full, the ATO offers payment plans that allow instalments over a period of time. However, it’s important to remember that GIC applies to unpaid tax debts and is calculated daily, continuing to accrue whilst an overdue debt remains on the account, even if on a payment plan.
If a remission request is declined, the ATO will send a letter explaining the decision. For GIC remissions, taxpayers generally cannot lodge an objection with the ATO or have the decision reviewed by the Administrative Review Tribunal. However, if key information was left out or an error was made, a new request can be submitted. Taxpayers may also seek judicial review of the decision in the Federal Court under the Administrative Decisions (Judicial Review) Act 1977.
The ATO advises businesses to contact them as soon as possible if facing payment difficulties, rather than waiting for debts to accumulate. Proactive engagement with the tax office generally improves the prospects of negotiating manageable payment terms and reduces penalty exposures.
The new remission application forms are available for download from the ATO website, with instructions on submitting them via online services.
Visit Tax support when you need it most for other support options available to people experiencing vulnerability.
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