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  • Interest on early payments

    Interest on early payments (IEP) is interest we pay when you make a payment towards certain tax liabilities more than 14 days before the due date. Interest you receive on early payments is assessable income, so you need to include it in your tax return.

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    Payments eligible for IEP

    You may receive IEP when you make payments towards any of the following liabilities more than 14 days before the due date:

    • income tax (including Medicare levy and Medicare levy surcharge)
    • compulsory Higher Education Loan Program (HELP) repayments
    • compulsory Vocational Education and Training Student Loan (VETSL) repayments
    • Student Financial Supplement Scheme (SFSS) assessment debts
    • compulsory Student Start-up Loan (SSL) repayments
    • compulsory ABSTUDY Student Start-up Loan (SSL) repayments
    • compulsory Trade Support Loan (TSL) debt repayments
    • interest on distributions from non-resident trust estates
    • shortfall interest charge (SIC).

    Payments not eligible for IEP

    The following payments are not eligible for IEP:

    • pay as you go (PAYG) withholding amounts including
      • amounts withheld from interest, dividends and royalties
      • amounts withheld by payers (including those withheld for the purpose of repaying contributions or debts for HELP, VETSL SFSS, TSL, SSL or ABSTUDY SSL)
       
    • PAYG instalments
    • self-managed super fund (SMSF) supervisory levy payments
    • any part of a payment that exceeds the amount that is due and payable.

    How to calculate the IEP payable

    Interest is payable on the amount of the early payments you make. The period for which the interest is payable is worked out according to your circumstances.

    For individuals and trusts, interest is payable:

    • from the later of
      • the date of issue on your notice setting out the amount of tax, debt or interest you need to pay
      • the date you make the payment
       
    • until and including the payment due date.

    For companies and super funds, interest is payable from the date you make the payment up to and including the due date for payment.

    Interest on early payments is not payable:

    • on amounts that exceed the value of your tax debt
    • for any period after we refund your early payment.

    You can also check the formula we use to calculate credit interest and the rates.

    Payment of IEP

    From March 2022, we will automate the calculation and payment of IEP entitlements for eligible early payments. This process applies to amounts you paid us since 1 July 2021.

    We calculate IEP after the due date of the tax liability. The IEP will be paid directly to your nominated bank account, so make sure your financial institution details are up to date. However, we only pay IEP if your interest amount is 50 cents or more.

    We may use your IEP amount to offset income tax and other debts.

    Early payments made before 1 July 2021

    To claim IEP entitlements for early payments made before 1 July 2021, you can:

    • include it as a Credit for early payments in your tax return for the income year in which the interest entitlement arises – use the interest on early payments calculator to calculate the amount of your entitlement
    • write to us to provide details of your entitlement.

    How we treat IEP

    Interest on early payments is assessable income. Include any IEP in your tax return in either the:

    • income year you receive the interest payment
    • income year it is offset against another tax debt you had with us.
    Last modified: 18 May 2022QC 67821