What is the cost of not paying tax on time?

The rules surrounding collection of tax are tightening up and being enforced by the ATO. The General Interest Charge (GIC) for all taxpayers is applied to late tax payments at a daily rate.

The GIC is currently 10.78% pa. Ouch.

GIC is applied to unpaid tax debts and is intended to compensate the government for the time value of money. And this is an unsecured rate, not as low as your current mortgage and more than double what you might be earning with your money in the bank.

Seems high? Well, it is now going to hurt a lot more.

From 1 July 2025, the ability to deduct the GIC has been removed. The purpose of this is to ensure that interest on overdue tax liabilities remains an effective deterrent, promoting the timely payment of tax liabilities.

After tax cost? The previously deductable 10.78% is equivalent to between 14% and 23% after tax.

Now that’s expensive.

The ATO’s debt book has grown substantially in recent years. Collectable debt has increased by 99% between 2018-19 and 2023- 24 to reach a massive $52.8 billion.

The ATO has outlined a clear approach to the remission of the GIC for taxpayers, aiming to maintain “fairness while encouraging compliance”.

The Commissioner of Taxation has discretion to remit GIC where, for example, taxpayers are affected by a natural disaster, sudden illness, or financial hardship. In the past year we have really noticed a change to the previous softer COVID approach.

In truth, we are seeing next to no reduction of GIC charges by the ATO.
And they are calling us when your tax is late. It might only be a couple of days but they want to know that it is coming and that you know they know it is late.

The landscape has changed.

Andrea McNamara July 2025