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Interest on overpaid and underpaid duties and tax (UOMI)

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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.

What interest is applied to

Interest applies to these taxes and duties:

  • casino duty
  • child support deductions by employers
  • fringe benefit tax (FBT)
  • gaming machine duty and problem gambling levy
  • goods and services tax (GST)
  • imputation accounts
  • income tax
  • lottery duty
  • non-resident withholding tax (on interest and dividends)
  • PAYE deductions
  • residential land withholding tax (RLWT)
  • resident withholding tax (RWT) (on interest and dividends)
  • student loan deductions by employers
  • ESCT (employer superannuation contribution tax)
  • totalisator duty
  • Working for Families Tax Credits (WfFTC)

We do not apply interest for:

  • amounts under $100
  • student loan repayments
  • child support payments.

Interest amounts

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.

When interest rate started Debit rate Credit rate
8 May 2017 8.22% 1.02%
8 May 2016 8.27% 1.62%
8 May 2015 9.21% 2.63%

When interest starts

If you have underpaid tax or duty, interest:

  • starts on the day after the original due date for the amount owing
  • stops on the day the outstanding balance (including interest) gets paid in full.

If you have overpaid tax or duty, interest starts on the latest of either:

  • the day after the original due date, or
  • the day after payment.

If you need to file a tax return to get a refund of your overpayment, interest starts on the latest of the:

  • original due date
  • day after the payment that generates the refund (that is when the credit becomes available), or
  • date you filed your return.

In most cases, interest stops the day the overpaid tax is refunded or transferred to another tax account or period.

Interest you’re paid is gross income

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.

Underpaid interest is deductible

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.

Interest on tax in dispute

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.

Remission of interest

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.

Interest and extra time to pay

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.

Interest and payments

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.