On 18 December 2024, as part of the 2024–25 Mid-Year Economic Fiscal OutlookExternal Link, the Government announced it will amend the tax law to strengthen Australia’s current tax penalty and interest regimes.
Announced measures
The Government announced it will amend the tax law to:
- ensuring tax scheme penalties apply where taxpayers are in a loss position, from 1 July 2026
- penalising large taxpayers that mischaracterise or undervalue interest or dividend payments, to which withholding tax would otherwise apply, starting from 1 July 2026.
These measures target gaps within the current tax penalty regime to improve tax compliance and integrity of the tax system, and to strengthen the disincentives for tax avoidance.
These measures are not yet law.
Shortfall interest charge changes
The Government announced that it will extend shortfall interest charge to repayments of overclaimed tax offsets. The amendment to the law is contained in the Future Made in Australia (Production Tax Credit and Other Measures) Act 2025.
Where an assessment of an entity’s tax liabilities is amended and, as a result, the amount of the tax offset for which the entity is eligible is reduced, the entity is liable to pay shortfall interest charge on the excessive amount of tax offset they received.
These changes apply to assessments made on and after 1 April 2025. This measure is now law.
For more information, see Future Made in Australia (Production Tax Credits and Other Measures) Act 2025External Link