The ATO charges interest on unpaid tax. It's called General Interest Charge (GIC) and it runs every day, including the days you pay.
Since July last year it stopped being tax-deductible. If your business owed $50,000 in GIC last year, the tax deduction meant the real cost was closer to $35,000. This year it costs $50,000. Same debt, 30% more expensive. And it's still compounding.
This has been building for years. The interest owed by Australian businesses has grown 185% in six years. The actual debt grew 94%. Of the $54.2B the ATO is chasing, 18 cents in every dollar is now interest. Six years ago it was 13 cents.
For many businesses, interest has overtaken the original debt. That's part of what brought this review into being.
The shift became visible in late 2023. The ATO moved into collection mode. Refusal rates on remission applications increased. These are the formal requests businesses make to have GIC reduced or waived, sometimes completely.
The professional community noticed and complaints to the Ombudsman followed. Last week the Tax Ombudsman released its review. The ATO accepted all four recommendations.
The Ombudsman will be monitoring implementation. But when you have tax debt, the one thing you don't have is time. So here is what changed, what it means, and what to do today.
A payment plan stops enforcement. It does not stop the interest. GIC compounds every day you are on the plan. The only way to reduce that cost is a remission application running alongside it.
The reconsideration pathway this review has opened is a genuine opportunity, for the first time a refused application is not the end of the road.
You can now ask for the decision to be looked at again on the basis that the criteria weren't applied correctly. No new evidence. No lawyers. No federal court. That last part matters more than it sounds.
Until now, your only avenue to challenge a refusal was a tribunal or court process most businesses couldn't afford or stomach.
This is a genuine change. If you got knocked back in the past 18 months and the full story wasn't put forward, it's worth another look.
Most businesses with ATO debt have grounds. The question is whether the case is put together well enough to succeed.
But the door only opens if you knock on it correctly.
The standard of application is the bottleneck. The approval rates in the review sound good: 84% for large businesses, 75-77% for small. But those came from 126,000 applications out of 19.7 million lodging taxpayers. Six in every thousand.
Those businesses were the ones who knew to apply in the first place, and in all likelihood had specialist help. The new pathway will only deliver those outcomes to businesses that bring the same level of preparation to it. Whether this produces real outcome change at volume is still an open question. Time will tell.
Most people think their accountant covers this. A good accountant might have five ATO debt cases on the go at any time. We run more than 150. That's not a dig. It's the difference between knowing the rules and knowing how they play out in practice. There's no case officer filling gaps anymore. What you submit is what gets assessed.
One in three businesses that defaulted on ATO debt were gone within six months. That is the CreditorWatch number across 19,439 companies. Not struggling. Gone. Getting to $100,000 is not hard.
GIC alone can double a debt in a few years without a payment arrangement in place. The ATO flags your debt to credit bureaus at $100,000. Most businesses don't know that until it happens. We start worrying at $70,000.
The door is open. The question is whether you can get through it. The businesses that do will have acted early, prepared properly, and worked with people who do this every day.
Don't wait to find out which side of that line you're on.
Michael Moon is a Director at Tax Assure, a specialist tax debt negotiation firm. Tax Assure works on an assessment and engagement fee followed by a success fee based on GIC and penalties actually remitted. Initial consults are obligation free. 1300 952 295 | www.taxassure.com.au
