If you overpay any tax or duty we will pay you back with interest. If you underpay tax, we will charge you interest. We may also charge a penalty with interest. This is often called use of money interest, or UOMI.
Interest applies to these taxes and duties:
We do not apply interest for:
Interest gets calculated daily on overpaid or underpaid tax. It does not compound and is not included when calculating penalties.
The interest rates are set by government and are based on market rates, so they vary over time.
If you have underpaid tax or duty, interest:
If you have overpaid tax or duty, interest starts on the latest of either:
If you need to file a tax return to get a refund of your overpayment, interest starts on the latest of the:
In most cases, interest stops the day the overpaid tax is refunded or transferred to another tax account or period.
Any interest you’re paid on an overpayment is gross income. You will need to include it in your income tax return or income tax assessment for the year in which it is refunded. You need to do this even if you credit the interest towards paying other unpaid tax.
If your return is reassessed and we find that you have overpaid, you may be paid interest. This is also gross income but only in the income year following the year of assessment.
Interest you pay on underpayments of tax is deductible for business purposes.
If your return is reassessed and we find that you have underpaid, you may have to pay interest. This is also deductible, but only in the income year following the year of reassessment.
When you’re disputing a tax amount, you can put payment on hold until a decision is made. If we decide the amount in dispute is not right, we’ll refund the disputed tax and pay you interest on it. If we decide that the amount in dispute is right, you’ll have to pay us any outstanding amount and any interest on it.
Interest can be remitted (legally forgiven) in limited circumstances, such as where we’ve given you incorrect advice and that advice has directly resulted in an error. Remission can also occur when interest has been imposed correctly, but we decide to relieve you of the liability to pay.
You must apply for remission in writing and must provide evidence to show why interest should be remitted. Each case is considered individually.
When you receive a notice of assessment or a statement of account balance we will give you up to an extra 30 days to pay. If the balance is paid within 30 days, you do not need to pay the interest that gets added between the issue date and the date of the payment.
If you pay after more than 30 days, the interest amount will be recalculated, so the balance may not be cleared in full.
If you make a payment to clear unpaid tax, it is used to pay off unpaid interest and then tax. The exception to this rule is for payments of provisional tax, where payments are used for provisional tax instalments as specified by the taxpayer.
Credit interest may be used to pay other unpaid taxes.
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