GENERAL AND SHORTFALL INTEREST CHARGE REMISSION – A STATE OF FLUX AND INERTIA AT THE SAME TIME?

General interest charge and shortfall interest charge remission - a state of flux and inertia at the same time?

The current climate regarding Australia’s tax debt and changing interest deductibility laws makes fascinating reading:

The ATO is making public and overt statements about the nation’s growing tax debt, a large portion of which makes up statutory interest components.
The public has been forewarned that the ATO will use “the full powers available to (them)” to collect the debt.
The ATO’s appetite for concessionary treatment, a hallmark of the COVID-19 period, is low and court winding up processes are near pre-COVID-19 levels.
Starting 1 July 2025, taxpayers can no longer claim an income tax deduction for interest charges incurred.

What we are then left with is taxpayers with growing tax debts and a more proactive recovery approach from the regulator. As a general rule, the ATO does not settle tax debts on commercial, negotiated terms. Therefore, taxpayers are left proposing lengthy payment terms with the ATO, with interest continuing to accrue, often backed by an offer of real property security. Speaking colloquially, the taxpayer is offering the family home before it is taken from it involuntarily.

One mechanism available is to apply for a remission of interest charges – the statutory discretionary power is broadly defined. Legitimate Aussie battlers typically have one or more compelling reasons for remission to be granted., Health concerns, employee misfeasance, ATO audit delay and former good compliance history can, depending on the circumstances, make up solid grounds for a remission request.

However, the ATO’s current approach to these remission requests appears:

Strict;
Often limited to brief, generic explanations for refusal;
Lacking a personalised approach (no name to the decision); and
Mired by substantial delays in processing times.

What then is a taxpayer left to do?

Apply again, and wait months for potentially the same outcome?
Lodge Federal Court proceedings in relation to the decision or failure to make a decision, costing thousands and embroiling them in a dispute with a government body most taxpayers want to keep on good terms with?
‘Suck it up’ and/or consider insolvency-related processes?

Whilst the change in deductibility laws and more assertive approach from the ATO represents a ‘state of flux’, the ATO’s approach to remission might represent a state of inertia to many taxpayers, who fail to resolve their interest issue.

The team at SMAILES KRAWITZ has experience in dealing with payment arrangement matters and interest remission requests and have implemented effective strategies and procedures to improve a taxpayer’s chances for a favourable outcome.

The material in this article is provided only for general information. It does not constitute legal or other advice.

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Alan Krawitz19 June 2025