Calculate and report ATO interest

Why we charge or impose interest

We charge or impose interest in specific situations, including:

• late payment of taxes and penalties
• an increase in your tax liability as a result of an amendment to your assessment
• an increase in other tax liabilities, such as goods and services tax or pay as you go amounts.

If we charge you interest, or pay you interest, you report the amounts in your tax return.

• You can claim a deduction for some types of interest we charge you.
• You must declare some types of interest paid or remitted by the Commissioner as assessable income.

We pre-fill interest information in your tax return.

For more information, see Interest charged by the ATO.

Pre-fill interest data

The amount of interest you have been charged is pre-filled in your tax return, if you lodge online using myTax. The ATO interest pre-fill data is information we provide to help you to work out the amount of ATO interest that is assessable or deductible.

Before you lodge your tax return, check your statement of account to ensure the pre-fill data is accurate. If not, you may want to manually calculate your interest.

If you're a Tax agent, don't use the Year to date interest summary report to complete the tax return as there are Recurring data issues – calculating ATO interest.

Reporting ATO interest

We provide ATO interest data to individual taxpayers for the 2014 and later income years.

We also give this data to tax agents through the Pre-filling report and the practitioner lodgment service. We display a message in the Pre-filling report to advise if a client has ATO interest for 2013 and earlier income years.

From 2021, pre-fill interest data will now be sourced from all client accounts held by the individual taxpayers in the main accounting system, including the income tax account and integrated client account.

We report the following interest types:

• General interest charge (GIC)
• Shortfall interest charge (SIC)
• Late payment interest (LPI)
• Interest on early payment (IEP)
• Interest on overpayment (IOP)
• Delayed refund interest (DRI).

We report on interest that you:

• may be able to claim as a deduction (GIC, SIC, LPI)
• must declare as assessable income (GIC, SIC or LPI remissions or recoupments)
• must claim as interest paid by the ATO (IOP, IEP, DRI).

Individual taxpayers can choose to report ATO interest deductions and income using either:

• ATO interest – calculation
• Manually calculating ATO interest.

Completing ATO interest in your tax return

We changed the individual tax return labels you use to report ATO interest as follows:

• For 2018 and later income years you report
  • interest deductions at question D10 – label N Cost of managing tax affairs – Interest charged by the ATO
  • assessable interest at question 24 – label X Other income – Category 2 (ATO interest)
  • interest paid by the ATO at question 10 Gross interest.
• For 2017 and prior income years you report
  • interest deductions at question D10 Cost of managing affairs
  • assessable interest at question 24 – label Y Other income
  • interest paid by the ATO (that is, IOP, IEP, DRI) at question 10 Gross interest.

Recurring data issues

Before you lodge your tax return, you should check your pre-fill data against your:

• ATO statements of account
• other source documents.

Interest calculations will not capture your specific circumstances in the following situations:

• Recoupments of interest charged
  When we report interest remission and credit adjustments as assessable income, we assume you have claimed a deduction for interest that we imposed. If you have not claimed a deduction and the period for requesting an amendment of your return to claim the deduction has lapsed, you don't include that interest income. (You may need to adjust the interest totals we have provided to remove the amount you are not claiming.)
• Change in residency status
  We report interest paid by the ATO on the basis of your residency status when the interest data is extracted from your account at the end of the income year. If you were a non-resident at the date of extraction, no interest paid data will be provided. If you were a non-resident when we paid you interest, then we should have withheld tax from that payment. If this is the case you don't have to declare this interest in your tax return. If tax was not withheld, you must declare the interest as income at question 10 Gross interest.
  You may need to adjust the interest totals we have provided to remove or add the interest paid by the ATO. See Examples 5 and 6
• Movement of transactions across ICA
  We move transactions across accounts. For example, to isolate pre and post-bankruptcy transactions; to isolate amounts that are in dispute. When we move a transaction between accounts, the process date is reported as the date the transaction was moved. This means interest previously reported may be reported again in a later pre-fill report. We have revised our business rules to prevent this duplication in the report for 2018 and later years. You may need to adjust the interest totals we provide for the 2017 and prior years if your accounts contain moved transactions.

Calculating ATO interest

For the 2015 and prior income years, we use the effective date and processed date to capture separate interest totals for:

• interest deductions
• assessable interest
• interest paid by the ATO.

Non-individual taxpayers will need to continue using these calculation rules for all income years.

For the 2016 and later income years, we capture all interest transactions in the pre-fill totals for individual taxpayers using the processed date. We also report either a net deduction or a net assessable interest amount instead of a separate total for these interest categories. Interest is reported as follows:

• net interest deductions at question D10 or question D10 – label N (where the interest imposed exceeds the interest income)
• net assessable interest at question 24 – label Y or question 24 – label X (where the interest income exceeds the interest imposed), and
• interest paid by the ATO at question 10.

Where the net balance of interest calculations is nil, no interest will be reported. Nor will we provide a message that there is any interest.

Individual taxpayers don't have to rely on the pre-fill interest amounts. They can use the previous method of calculation. See Manually calculating ATO interest.

2016 income year adjustments

This only impacts the calculation of pre-fill interest for the 2016 income tax year.

The 2015 Pre-filling report was changed to a static report on 9 November 2015 to cater for the new reporting method. This means:

• the debit interest transactions processed on or after 9 November 2015 with an effective date of 30 June 2015 or earlier will be included in the interest totals for the 2016 pre-fill report
• the debit interest transactions processed on or after 1 July 2015 but before 9 November 2015 with an effective date of 30 June 2015 or earlier may be captured in the interest totals in several pre-fill reports – the 2016 and earlier year reports – depending on when interest was incurred.

If you lodged your 2015 tax return before 9 November 2015 using ATO pre-fill data, you may need to adjust the 2016 pre-fill interest figures (see Example 4).

The following may help you to work out if adjustments will be needed:

• Did you have ATO interest in 2015?
  • If no, no adjustment to 2016 data is needed.
• Did you lodge your 2014–15 return using pre-fill data before 9 November 2015?
  • Adjust 2016 pre-fill data (see note 1) by any debit interest transaction with
    • process date between 1 July 2015 and the date you lodged, and
    • effective date between 1 July 2014 and 30 June 2015.
• Did you lodge your 2014–15 return using pre-filled figures after 9 November 2015?
  • Adjust 2016 pre-fill data (see note 1) by any debit interest transaction with     
    • process date between 1 July 2015 and 9 November
    • effective date between 1 July 2014 and 30 June 2015.
• Did you lodge your 2014–15 return using non-prefilled figures?    
  • Manual calculation method required.

Note 1. An adjustment will be needed if the same debit interest transaction is captured in the 2015 and 2016 interest totals. This is done by reducing the 2016 deductions claimed. That is, increase 24Y or decrease D10 by the amount of the duplicated transaction. Adjustments to credit transactions are not needed.

How the new reporting process works – examples

 

 

 

 

 

Manually calculating ATO interest

You must calculate the ATO interest you want to claim as a deduction or must declare as assessable income, if:

• we do not provide you pre-fill interest data but:    
  • your statement of account shows you have ATO interest
  • we told your agent in the Pre-filling report that you have ATO interest on your account
• we paid interest to you in the period 1 July 2015 to 9 November 2015 and:    
  • the transactions have an effective date prior to 1 July 2015, and
  • you included the interest in an earlier tax return – see Transitional year adjustments.

You may wish to manually calculate the ATO interest where:

• you prefer to declare interest deductions and income separately at the relevant labels in your tax return, instead of reporting a net balance of interest
• you don't wish to rely on ATO pre-fill data
• you want to assess which reporting method provides the best outcome for you.

General rules for assessing ATO interest transactions

• Effective date – the date a transaction affects the account for determining the daily balance and calculating GIC.
• Processed date – the date we process a transaction on your account.

Question 10 Gross interest

This label includes the interest we've paid or credited to you (IOP, IEP, DRI).

The same rules apply for both the legislative process and the new reporting process.

For the calculation:

• the processed date is when we paid you interest
• declare any new credit balance.

Question D10 or D10N Cost of managing tax affairs– Interest charged by the ATO

This label includes an interest charge we imposed on you (GIC, SIC, LPI).

For the calculation under the legislative rules:

• use the processed date and effective date of the interest transaction to determine when it was incurred (Noting that GIC with an effective date of 1 July that relates to interest imposed in the period prior to 1 July will be reported in that prior year)
• claim the net debit interest balance.

For the calculation under the business rules for the new reporting process:

• use the processed date of the interest transaction
• declare a debit balance where the net deduction is greater than your net assessable interest.

Question 24Y or 24X (Other income – Category 2 (ATO interest)

This label includes amounts of interest we imposed on you that have been remitted or recouped. This includes:

• GIC remissions and GIC credit adjustments
• SIC remissions and SIC credit adjustments
• and LPI remission/credit adjustments).

It does not include certain transactions such as write-offs or released amounts.

Under the legislative rules you must declare interest that has been remitted or reduced where you claimed a deduction, or can claim a deduction, for the interest that was imposed. (The benefit that you gain from the deduction must reflect the actual amount of interest imposed.)

Interest is assessable in the year that it is remitted or recouped.

For the calculation under the legislative rules:

• use the processed date of the transaction to work out when the interest that we imposed has been is recouped (that is, the benefit of the deduction has been reversed)
• declare the net credit balance.

For the calculation under the business rules for the new reporting process:

• use processed date
• declare the net income where this is greater than the net deduction total.

Applying the different calculation rules

You will need to analyse your ATO statements of account and review all interest transactions in the relevant timeframe. The examples below show how to calculate interest deductions and income amounts using the different reporting methods.

Example: Statement of account #1 – Income tax

Processed date	Effective date	Transaction description	Debit $	Credit $	Running balance account $	DR/ CR
02/06/2015	02/06/2015	General interest charge (GIC) from 01 Jun to 02 Jun 2015	5.46	0.00	13,003.94	DR
02/06/2015	02/06/2015	Remission of general interest charge (GIC)	0.00	−5.46	12,998.48	DR
01/07/2015	01/07/2015	General interest charge (GIC) calculated from 02 Jun to 30 Jun 2015	99.82	0.00	13,098.30	DR
01/07/2015	01/07/2015	Remission of general interest charge (GIC)	0.00	−99.82	12,998.48	DR
01/08/2015	01/08/2015	General interest charge (GIC) calculated from 01 Jul to 31 Jul 2015	107.40	0.00	13,105.88	DR
01/09/2015	01/09/2015	General interest charge (GIC) calculated from 01 Aug to 31 Aug 2015	108.29	0.00	13,214.17	DR
01/10/2015	01/10/2015	General interest charge (GIC) calculated from 01 Sep to 30 Sep 2015	105.64	0.00	13,319.81	DR
03/11/2015	03/11/2015	General interest charge (GIC) calculated from 01 Oct to 02 Nov 2015	116.46	0.00	13,436.27	DR
01/12/2015	01/12/2015	General interest charge (GIC) calculated from 03 Nov to 30 Nov 2015	99.61	0.00	13,535.88	DR
01/12/2015	01/12/2015	Remission of general interest charge (GIC)	0.00	−99.61	13,436.27	DR
02/01/2016	02/01/2016	General interest charge (GIC) calculated from 01 Dec 2015 to 01 Jan 2016	113.93	0.00	13,550.20	DR
02/02/2016	02/02/2016	General interest charge (GIC) calculated from 02 Jan to 01 Feb 2016	112.65	0.00	13,662.85	DR
02/03/2016	02/03/2016	General interest charge (GIC) calculated from 02 Feb to 01 Mar 2016	102.56	0.00	13,765.41	DR

Calculating ATO interest under the new process – statement 1

Identify the interest transactions processed in the period 1 July 2015 to 30 June 2016.

For the transitional 2016 year we adjust your pre-fill interest data to exclude the GIC processed on 1 July as this was included in the 2015 pre-fill interest totals.

• Total deductible interest
  $107.40 + $108.29 + $105.64 + $116.46 + $99.61 + $113.93 + $112.65 + $102.56 = $866.54
• Total assessable interest income
  $99.82 + $99.61 = $199.43

Net interest reported:

Net deductible interest you could claim at question D10 = $866.54 − $199.43 = $667.11

Calculating ATO interest under the legislative rules – statement 1

Identify the income year in which:

• GIC was incurred (which is generally by the effective date of the transaction)
• interest that was remitted or reduced (by the processed date of the transaction).

Interest reported:

• Total deductible interest expense you could claim at question D10 = $866.54
• Total assessable interest income you must declare at question 24 – label Y = $199.43

Example: Statement of account #2 – Income tax

Processed date	Effective date	Transaction description	Debit $	Credit $	Running balance account	DR/ CR
26/09/2015	05/06/2014	Tax return individuals – income tax for the period from 1 Jul 2012 to 30 Jun 2013	1,199.15	0.00	1,199.15	DR
26/09/2015	21/11/2014	Tax return individuals – income tax for the period from 1 Jul 2013 to 30 Jun 2014	15,644.15	0.00	16,843.30	DR
26/09/2015	26/09/2015	Credit offset from Client Integrated Account	0.00	−9,343.00	7,500.30	DR
29/09/2015	01/07/2014	General interest charge (GIC) calculated from 1 Oct 2013 to 30 Jun 2014	8.52	0.00	7,508.82	DR
29/09/2015	01/07/2014	Remission of general interest charge (GIC)	0.00	−8.52	7,500.30	DR
29/09/2015	02/06/2015	Amended general interest charge (GIC) calculated from 1 Jul 2014 to 1 Jun 2015	926.45	0.00	8,426.75	DR
29/09/2015	02/06/2015	Remission of general interest charge (GIC)	0.00	−926.45	7,500.30	DR
30/09/2015	01/07/2014	Amended general interest charge (GIC) calculated from 1 Jun 2013 to 30 Jun 2014 (see note)	62.32	0.00	7,562.62	DR
30/09/2015	30/09/2015	Remission of general interest charge (GIC)	0.00	−62.32	7,500.30	DR

Amended general interest charge denotes an account correction by the ATO. This may affect interest amounts you previously reported depending on the method you use.

Calculating ATO interest under the new process – statement 2

Identify the interest transactions processed in the period 1 July 2015 to 30 June 2016.

• Total deductible interest you could claim at question D10
  $8.52 + $926.45 + $62.32 = $997.29
• Total assessable interest income you must declare at question 24Y
  $8.52 + $926.45 + $62.32 = $997.29

Net interest reported:

Net deductible interest is $997.29 − $997.29 = $0.00

There is no interest to be reported at question D10 or 24 – label Y in the 2016 tax return.

Calculating ATO interest under the legislative rules – statement 2

The account adjustment by the ATO does not change the timing of the deduction for the GIC incurred in the 2014 income year. It corrects the GIC that can be claimed as a deduction in the tax return for that year.

2014 income year:

• Total deductible interest to report at question D10 = $62.32

You must lodge an out of time objection if you wish to include this deduction with any other deductions claimed, if any.

2016 income year:

• Total deductible interest you could claim at question D10
  $8.52 + $926.45 = $934.97
• Total assessable interest income you must declare at question 24 – label Y
  $8.52 + $926.45 + $62.32 = $997.29

The 2013 and 2014 tax returns were lodged late in the 2016 income year. The GIC of $8.52 and $926.45 imposed on the liabilities established by the notices of assessment for these income years, is incurred in 2016. The $62.32 is incurred in the 2014 income year as the account adjustment alters the interest imposed in that year.

For more information on SIC and GIC charges we impose, see:

• TD 2012/2 Income tax: when is the shortfall interest charge incurred for the purposes of paragraph 25-5(1)(c) of the Income Tax Assessment Act 1997
• PS LA 2011/12 Remission of General Interest Charge.