The Australian Taxation Office has collected over $9.4 billion in interest from late tax payments in the past financial year. This comes as the ATO takes a tougher position on waiving interest to encourage timely payments and improve compliance. However, the shift has led to confusion and frustration among taxpayers who are already burdened by growing debt. Approval rates for interest waivers have fallen and the general interest charge now exceeds 10% annually, triggering concerns about fairness and impact.
While the ATO's general interest charge system has long existed to deter late payments, its application has changed. During the pandemic, the ATO adopted a more compassionate view, taking individual and crisis-related hardships into account. In 2022, about 88% of remission requests were approved. By 2023, approval had dropped to 76%, drawing attention from both taxpayers and tax professionals.
In the 2023 financial year, the ATO received more than 120,000 requests for relief but has become more selective. Partial remissions, where only a portion of interest is waived, are now more common than full cancellations. Tax professionals note growing difficulty in securing approval, even in cases involving administrative delays or natural disasters. Claims between $10,000 and $20 million appear especially affected.
The steep rise in interest charges also reflects increasing tax debt, which now totals over $50 billion. Analysts warn that making remissions harder to obtain could backfire, as more interest on unpaid debt worsens financial stress. As a result, two significant reviews are underway. One is internal within the ATO and the other is being led by the independent Taxation Ombudsman.
The Ombudsman, having received more than 130 complaints over the past year, is investigating inconsistent outcomes in remission decisions. Many taxpayers say they face unclear processes and a lack of transparency. The concern is that rising interest undermines a taxpayer’s ability to repay, defeating the intended purpose of the ATO’s rules. Findings from the Ombudsman’s review are expected in early 2025 alongside the ATO’s internal consultation, which remains open until October.
