Interest penalty rates for 1 October to 31 December 2016 – GIC: 8.75% and SIC: 4.76% (with summary of when they apply)

The ATO has advised that the general interest charge (GIC) rate, shortfall interest charge (SIC) and related rates, for the second quarter of the 2016-17 income tax year (1 October 2016 to 31 December 2016) is as follows:

• GIC rate is 8.76% ie 90 day BAB rate 1.76% + 7% uplift factor.
• GIC daily compounding rate is 0.02393443%.
• SIC rate is 4.76% ie 90 day BAB rate 1.76% + 3% uplift factor.
• SIC daily compounding rate is 0.01300546%.
• IOP, IEP and DRI rate is 1.76%.

[LTN 176, 12/9/16]

General interest charge (GIC) rates

On 1 July 1999, the penalty arrangements for late payment and other obligations were streamlined with the introduction of a uniform tax deductible general interest charge (GIC). The GIC replaced a complex system of interest and penalties we imposed for late payments.

Section 8AAD of the Taxation Administration Act 1953 specifies how the rate of the charge is calculated. To work out the daily rate, divide this rate by the number of days in a calendar year.

From 1 July 1999 to 30 June 2000, the GIC was based on the relevant 13-week Treasury Note rate plus eight percentage points. In June 2000, the Australian Office of Financial Management announced that fixed term Treasury Notes, including the 13-week Treasury Note, would no longer be issued. Due to this, the GIC rate of 13.86% remained fixed from June 2000 until the new legislative basis, the 90 day Bank Accepted Bill rate and a reduced uplift factor of 7% was adopted from 1 July 2001.

During the 2000 financial year, the GIC daily compounding rate only applied to pay as you earn, the prescribed payment system, the reportable payment system and sales tax with a simple interest rate applying to other taxes. However, the GIC compounding rate now extends to most taxes, including: income tax, fringe benefits tax, goods and services tax and pay as you go PAYG.

The GIC is updated quarterly with rates for the next quarter generally announced two weeks before the start of that quarter.

2016–17 income year

[ATO website – GIC]

Shortfall interest charge (SIC) rates

On 29 June 2005, the shortfall interest charge (SIC) was introduced for amendments of 2004–05 and later years’ income tax assessments. The SIC replaces, at a lower rate, the general interest charge (GIC) applied to income tax shortfalls for the period before assessments are amended.

GIC will continue to apply to tax shortfalls in amended assessments for the 2003–04 and earlier income years regardless of when those amendments are made. It will apply from the due date of the original assessment.

GIC will also apply to the original assessment and to any tax shortfalls (amended assessments) and associated SIC from their due date if they are not paid by that date.

Generally, the SIC applies from the due date for payment of the earlier, understated assessment until the day before we issue the notice of amended assessment. The amended assessment or tax shortfall and the related SIC are due 24 days after the amended assessment is issued.

SIC is calculated on a daily compounding basis. The formula for calculating SIC is provided in section 280-105 of Schedule 1 to the Taxation Administration Act 1953. It uses a base interest rate and an uplift factor of 3%. The base interest rate is defined in tax legislation and is the 90-day Bank Accepted Bill rate published by the Reserve Bank.

The SIC rate is updated quarterly with rates for the next quarter generally announced two weeks before the start of that quarter.

2016–17 income year

[ATO website – SIC]