Pre-filling service - Tax Agent Portal

Calculating ATO interest

We have received a number of escalations from agents claiming the amount of ATO interest displayed in the pre-filling report is incorrect.

How it occurs

The figures for the pre-filling report are extracted on a weekly basis. They incorporate business rules to capture the provisions of the Income Tax Assessment Act 1997 as they relate to certain interest amounts that may be claimed as a deduction and those that would be assessable.

The amounts displayed for clients are the sum of the amounts from the client's Statement of account.

The business rules we use for calculating ATO interest for income tax are as follows:

• Interest paid by the ATO (label 10)
• is assessable in the year that interest was credited to your client (the transaction process date)
• includes credit for interest on overpayments (IOP), interest on early payments (IEP) and delayed refund interest (DRI).
• Total net assessable interest income (label 24)
• is assessable in the year that the remission occurred (the transaction process date)
• includes remissions of general interest charge (GIC), shortfall interest charge (SIC) and late payment interest (LPI).
• Total net deductible interest expense (label D10)
• is deductible in the year that it was incurred (the effective date minus one day)
• includes debits for GIC, SIC and LPI.

Exceptions

The business rules will capture the correct totals for the relevant income tax year in the majority of cases. However, there are scenarios where figures provided in the pre-filling report may not suit your clients' circumstances.

The business rules currently do not accurately capture the following scenarios:

• The client has lodged prior year tax returns late.
• The client has been released from paying an amount of interest due to hardship - the released GIC does not have to be declared.
• ATO account activity has affected interest amounts, including revisions to effective dates, debit adjustments to remissions and cancellations.
• The client is a non-resident - any IOP,IEP or DRI applied is not included in the calculation for the end of the financial year.
• The client is a small business entity taxpayer and continues to use the simplified tax system accounting method - the client can only claim a deduction for GIC if it has been paid.
• We process your client's interest in one year but your client receives it in the following year.

We are working on the business rules to capture the interest amounts affected by these different scenarios.

What you should do

If one or more of the above scenarios applies to your client, the following documents may assist you to determine the interest amounts that may, or must, be claimed in your clients' tax returns:

• General interest charge - fact sheet
• Shortfall interest charge - fact sheet
• Taxation Determination TD2012/2 Income tax: when is the shortfall interest charge incurred for the purposed of paragraph 25-5(1)(c) of the Income Tax Assessment Act 1997
• chapter 93 of the ATO Receivables Policy.

This affects years 2012, 2011 and 2010. ATO interest is no longer displayed for 2009 and 2008.

Sections within Recurring data issues

• Associated non-formal trust accounts income showing on pre-filling report
• Associated non-individual entities investment income showing on individuals pre-filling report
• Calculating ATO interest
• Managed fund data reporting discrepancies
• Multiple or duplicated payment summaries
• Reportable employer super contributions (RESC) on payment summaries