Tax Debt Interest Under Investigation
A review of how the ATO manages the interest on unpaid debt is underway, with the community encouraged to have their say.
The Tax Ombudsman, Ruth Owen, is especially interested in looking at situations where taxpayers seek to have their interest charges reduced or removed (remitted) from their account when seeking to pay their tax debts.
The General Interest Charge (‘GIC’) is interest that accrues on a taxpayer’s outstanding debt with the ATO. The law allows the ATO to remit GIC where certain criteria are met. The Tax Ombudsman said the remission of debt interest charges was a hot topic, with her office receiving 134 complaints last financial year about the ATO’s approach.
“We’ve heard complaints about a general lack of consistency and transparency in the ATO’s approach to interest charges. Tax professionals and taxpayers have told us that it seems to be a matter of potluck as to who gets their interest reduced or remitted and who has to pay in full.”
Ruth Owen, Tax Ombudsman, September 2025
Ms. Owen said the ATO has publicly stated its intention to take a stricter approach to debt collection and interest charge remission, and the effects of this shift had been widely reported by the tax community.
“Taxpayers have an obligation to pay their tax bills, and we know most people are trying to do the right thing, but there are certain circumstances where we think the ATO could take a more compassionate approach to debt collection.”
Ruth Owen, Tax Ombudsman, September 2025
Unlike many other decisions from the ATO, a decision to refuse to remit or reduce the GIC cannot be reviewed by the Tribunal, making the Federal Court the only formal review forum.
This can be beyond the means or capacity of many taxpayers.
Further exacerbating the matter, from 1 July 2025 the GIC is no longer tax deductible,
significantly increasing the cost of repayment for small business and taxpayers already under
financial pressure.
The Tax Ombudsman’s review will examine:
- whether ATO policy, communications and guidance to staff and the public about how it considers GIC remission requests are clear;
- the reason behind the ATO’s recent decision to tighten up its remission of GIC and the intended outcomes;
- whether remission decisions are fair and reasonable and are made consistently for taxpayers in like circumstances, regardless of whether they are represented or unrepresented, and whether individual circumstances are taken into account;
- whether taxpayers are given adequate reasons not to remit their GIC; and
- whether there are opportunities to improve GIC remission systems and processes in light of the growing cost of impact on taxpayers.
Submissions are open until Friday, 10 October 2025.
Ref: Tax Ombudsman’s website, Media Release, 12 September 2025
