Melinda: “Computer says no” – when the system keeps charging interest

Melinda was subject to an ATO audit that extended for a prolonged period. As a result of the delay, shortfall interest charge (SIC) was imposed. Melinda disputed the SIC, arguing that the delay was not caused by her actions and that it was unfair for interest to accrue where she had not contributed to the delay.

The ATO initially refused to remit the SIC, maintaining that there had been no unreasonable delay on its part during the audit.

When the matter came to our office, we commenced an investigation and asked the ATO to explain — in detail — how the audit had progressed over time. This included what actions were taken, when key steps occurred, and whether any delays were attributable to ATO systems or processes. Rather than accepting high‑level assurances, we asked the ATO to account for the specific six‑month period in question.

Through that review, the ATO identified that a system issue on its internal platform had caused a significant delay in finalising the audit. That issue had not been identified earlier, and the delay had occurred through no fault of Melinda.

Once this was established, the ATO accepted that the SIC should not have been imposed for the affected period and it agreed to fully remit the SIC and refunded the amount to Melinda.

Alex: considering individual circumstance with GIC requests

A tax agent requested remission of general interest charge (GIC) for Alex. The request was based on Alex’s mental health challenges arising from pregnancy‑related complications.

The initial ATO officer supported remission but did not have the required delegation, so the matter was escalated to a senior officer. The senior officer declined the remission request. In doing so, the decision appeared to focus only on the circumstances of the business and did not adequately consider Alex’s personal health issues, which were outside her control.

Although the agent had raised health matters, the ATO did not seek further information or request the missing medical evidence before making the decision.

After we raised these issues with the ATO, the remission decision was reconsidered and approved.

Tax agent: when an agent’s health crisis led to unfair interest charges

An otherwise compliant company was surprised to find itself facing more than $39,000 in interest charges — not because it ignored its obligations, but because its tax agent became seriously unwell.

A tax agent approached us after the ATO imposed general interest charges (GIC) following the late lodgement of five years of company tax returns. Four of those returns were overdue, resulting in GIC totalling $39,334.72. The client had no record of poor compliance and had relied on their agent to manage their ongoing obligations.

The tax agent applied for GIC remission on medical grounds, providing specialist reports outlining significant mental health issues and serious family related problems that affected his capacity to work. However, the remission request was initially declined.

We engaged with the ATO to explain that the agent’s incapacity directly affected his ability to meet lodgement deadlines and that the outstanding returns could not be lodged until his condition stabilised. We also highlighted that the client had no reasonable way of knowing their agent was incapacitated.

After reviewing the circumstances, the ATO agreed to remit GIC for the period during which the tax agent was incapacitated, amounting to $14,942. GIC accrued after that period was not remitted, as the ATO considered the agent had recovered sufficiently to resume work and ultimately lodged the returns.

While the full amount of GIC was not removed, the outcome recognised genuine incapacity and reduced the unfair impact on a client with a strong compliance history.

Tax consultant: complete removal of two decades’ worth of GIC

A tax consulting firm representing a complainant approached us about a significant amount of General Interest Charges (GIC) imposed by the ATO—spanning over 20 years. The GIC had grown to more than six times the original tax liability.

The taxpayer permanently left Australia in 2004 and relied on a tax agent to lodge his final returns. Unfortunately, those returns were never lodged, and the issue only surfaced in 2023 when he applied for a Foreign Resident Capital Gains Withholding (FRCGW) tax variation on a property transfer. He acted promptly to lodge and pay the outstanding returns, but the ATO imposed GIC from 2005 through to the present day. While the original tax liability was $41,000, the GIC had compounded to over $275,000.

Despite multiple attempts by the tax representative to seek GIC remission, the ATO declined. When the matter came to us, we argued that imposing GIC was unfair given the taxpayer’s circumstances: he had permanently departed Australia, appointed a tax agent to manage compliance, and only discovered the issue decades later. The tax agent had been deregistered in 2013, leaving the taxpayer with no way to correct the oversight earlier.

After reviewing the facts, the ATO agreed to remit the GIC in full. This decision recognised that the taxpayer acted as soon as practicably possible once he was aware of the issue and could not reasonably have mitigated the situation earlier.

Tax agent: from GIC to refund

A tax agent approached us on behalf of a client who had been charged approximately $30,000 in General Interest Charges (GIC) by the ATO. The agent believed these charges were unfair.

Due to incorrect income reporting in the client’s 2022 tax return, the ATO reclassified the client as a medium business taxpayer instead of a small business. This reclassification brought the lodgement due date forward from 15 May to 15 January.

Although the tax agent obtained a lodgement deferral for the 2023 income year, they were unaware that a separate payment deferral was required. As a result, the ATO imposed significant GIC.

The agent tried to resolve the matter directly with the ATO, lodging two complaints. They argued that if the ATO considered the corrected 2022 income, the client would remain a small taxpayer, meaning the original due date of 15 May should apply—and the GIC should never have been charged. The ATO rejected this argument and further stated that, because the GIC had already been paid, it could not be ‘remitted’.

We reviewed whether the ATO had properly considered the circumstances. During our investigation, we identified an ATO audit position that agreed with the client’s corrected 2022 income. Using this information, we persuaded the ATO that, based on its own audit findings, the lodgement date of 15 May should apply. Therefore, as a matter of fairness, a ‘refund’ of $30,000 in GIC was appropriate. The ATO agreed, and the client received a full refund of the GIC.

Oliver: GIC remission win

Oliver fell behind on several years of tax lodgements after relying on incorrect information provided by an unauthorised former tax agent. As a result, approximately $185,000 of general interest change (GIC) accrued on his account. Wanting to fix the problem, Oliver contacted the ATO. During a phone call, he reasonably understood that once all outstanding lodgements were completed and the total debt established, the GIC would be considered for remission. Relying on this impression, he prioritised bringing their lodgements up to date.

When Oliver later applied for remission, the ATO refused on the basis that the delay in payment was within Oliver’s control and that he should have made earlier payments – contrary to the impression he had been given over the phone.

Oliver lodged a complaint with us and, after reviewing the call recordings, we observed that the ATO officer’s statements reasonably conveyed that remission could be available once all lodgements were complete. We considered the ATO’s refusal to be inconsistent with the expectations set during the call and the advice provided contributed to the delay in payment.We recommended that the ATO reconsider remission for the period after the phone call. The ATO agreed and as a result approximately $40,000 in GIC was remitted. Oliver expressed genuine relief that the outcome finally aligned with what he had understood from the initial ATO advice.