The Tax Ombudsman has opened a review into how the Australian Taxation Office (ATO) manages interest charges on unpaid tax debts, inviting submissions from taxpayers and professionals across the country.
The review will focus on the General Interest Charge (GIC), which accrues on outstanding tax debts. While the law allows the ATO to remit the charge in certain cases, concerns have grown about how consistently and transparently this discretion is being applied.
Tax Ombudsman Ruth Owen said her office received 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,” Ms Owen said.
She noted the ATO had publicly flagged a stricter stance on both debt collection and remission, a shift already felt by those seeking relief. “We know the ATO has reduced the number of cases in which it agrees reduction or remission and I think that requires further investigation as to why and what is fair and reasonable, when taking the taxpayer’s circumstances into account,” she said.
With the current GIC rate sitting around 11 per cent, Ms Owen warned that for many taxpayers, interest charges can quickly surpass the original debt, leaving them with obligations that spiral out of reach.
“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,” she said.
She added that financial pressures facing households in the current economy are adding to the stress for those trying to meet their tax obligations.
Decisions to refuse remission of GIC cannot be reviewed by the Administrative Appeals Tribunal, leaving the Federal Court as the only formal review option. This, Ms Owen noted, can be inaccessible for many taxpayers due to cost and complexity.
The burden has also grown since 1 July 2025, when GIC charges ceased to be tax deductible, raising the cost of repayment for small businesses and individuals already under strain.
“Although the GIC is an important element of the tax system, to ensure that those who deliberately avoid paying tax are not given an unfair advantage, it should not punish those trying to do the right thing,” Ms Owen said.
“This issue can affect the livelihood of small businesses and taxpayers already doing it tough – I encourage anyone that’s been impacted by an interest charge remission decision to contribute to our review and help us to thoroughly investigate the matter.”
The review will examine whether the ATO’s policy and guidance on remission are clear, whether decisions are fair and consistent, and whether taxpayers are given sufficient reasons when their requests are refused. It will also consider whether there are ways to improve the system given the growing financial impact.
Submissions are open until 5pm AEDT on 10 October 2025, with opportunities to participate via surveys and webinars.
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