When does the ATO start charging interest?
Short answer
The ATO starts charging general interest charge from the day after the payment due date, and it runs every day until the amount is paid. There is no grace period and no reminder first. Interest is charged at 11.43% a year this quarter, compounding daily, even if you lodged late and only found out about the debt afterwards. It can sometimes be removed through GIC remission.
The due dates that matter
Interest is tied to the payment due date, not the date you lodged or the date a letter arrived. The main ones are:
| Obligation | Payment due |
|---|---|
| Quarterly BAS | 28 October, 28 February, 28 April and 28 July |
| Monthly BAS | 21st of the following month |
| PAYG instalments | Same dates as your activity statement |
| Income tax | The date printed on your notice of assessment |
| Amended assessment | 21 days after the amended notice is issued |
If a due date falls on a weekend or public holiday it moves to the next business day. Lodging through a registered agent can give you a later lodgement date, and for some obligations a later payment date too, so check the date on your own account rather than assuming.
Three situations that catch people out
Lodging late. If a BAS due on 28 October is lodged in March, GIC on any amount owing runs from 28 October, not from March. You will see a lump of interest appear the moment the statement is processed. On top of that there is usually a failure to lodge penalty.
Amended assessments. If the ATO amends a return and you owe more, it first charges the lower shortfall interest charge from the original due date to the date of the amended notice. You then get 21 days to pay. After that, GIC applies to the unpaid tax and the unpaid SIC.
Payment plans. A plan stops firmer action, but it does not stop the clock. GIC keeps running inside a payment plan unless the ATO agrees to remit it. Many people are surprised that the balance is still growing while they pay.
Interest already running on a tax debt?
Talk to someone who deals with the ATO every day. It is free to ask.
How to stop the interest
Interest stops on every dollar the day it is paid. If you cannot pay everything, paying the oldest amounts or the primary tax first gives the best result, because the tax is what the interest is calculated on. A payment plan reduces the balance each month, which slows the interest, and once the tax is cleared you can ask the ATO to remit the interest that built up.
Remission is not automatic. The ATO looks at what caused the delay, whether it was outside your control and whether you have a good compliance history. Small amounts are often decided on the phone; larger amounts need a written request with evidence. If you are not sure whether the interest on your account is even correct, ask for a statement of account before you do anything else.
What to do next
- Find the actual due date for the amount you owe on your ATO statement of account, not the date you lodged.
- Pay what you can now, because interest stops on each dollar the day it is received.
- If you cannot pay in full, set up a payment plan and ask about remission once the tax is cleared.
Related questions
Does the ATO charge interest if I lodge on time but pay late?
Yes. Lodging and paying are separate obligations. Lodging on time avoids the failure to lodge penalty, but GIC still runs on any unpaid amount from the day after the payment due date. Lodging on time and paying late is still a much better position than not lodging, because you avoid penalties and keep access to a payment plan.
Does the ATO charge interest on interest?
Yes. GIC compounds daily, which means each day's interest is added to the balance and the next day's interest is calculated on the new total. That is why an unpaid debt grows by about 12.1% over a full year even though the annual rate is 11.43%.
Interest already running on a tax debt?
Talk to someone who deals with the ATO every day. It is free to ask.
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