• ATO interest – calculation and reporting

    This information may be useful if you need to manually calculate your ATO interest deductions or income. Or you choose to use ATO interest pre-fill data when preparing your tax return.

    Reporting ATO interest

    ATO interest totals will not be provided in pre-fill for the 2013 and prior income years. In 2016, we introduced a new way of capturing and reporting pre-fill information for ATO interest that we've imposed and remitted (or reduced) – that is, general interest charge (GIC), shortfall interest charge (SIC) and late payment interest (LPI).

    The new reporting method applies to individual taxpayers only.

    Note: We haven't changed how we calculate or report interest on early payment (IEP), interest on overpayment (IOP), or delayed refund interest (DRI).

    You don't have to use the new method of reporting. You can report interest in accordance with the previous reporting process using legislative rules (which are discussed in PS LA 2011/12).

    If you choose not to rely on our pre-fill information you will need to manually calculate your interest amounts using your statement of account.

    In some circumstances, ATO interest data won't be pre-filled. You'll need to refer to your statement of account to manually calculate your deductions or income amounts – using either reporting method.

    The interest amounts you manually calculate may be different to the ATO interest pre-fill amounts we report, depending on the reporting method you use. You'll need to determine which reporting method is more suitable for your particular circumstances.

    Next step:

    ATO interest – pre-fill data

    We source ATO interest data from the income tax account and the integrated client account (ICA). This information is provided for the 2014 and later income years.

    Previously, we provided information in relation to interest we charged you. We also provided information on the interest imposed that was subsequently remitted (or reduced). We used the processed date and effective date to capture these transactions.

    • Effective date – the date a transaction affects the account for determining the daily balance and calculating GIC.
    • Processed date (or posting date) – the date a transaction is processed on the account.

    From 1 July 2015, we simplified the reporting process. We now capture interest transactions using one date – the processed date. Plus, we only provide a net interest amount in our pre-fill report. This means we will pre-fill either a net deduction or net income amount:

    • you will have net interest deductions pre-filled at item D10 Cost of managing tax affairs where the interest imposed exceeds the interest remitted (or reduced).
    • you will have net assessable interest income pre-filled at item 24Y Other income where the remitted (or reduced) interest exceeds the interest imposed.
    • you won't have an amount of interest pre-filled at either items D10 or 24Y where the interest imposed equals the interest remitted (or reduced) in the relevant period – that is, the net balance is nil. In these circumstances, we will not pre-fill interest at either label nor will we provide a message stating that you have interest.

    Transitional year adjustments

    This only impacts the calculation of interest for the 2016 income tax year.

    The 2015 pre-fill report was changed to a static report on 9 November 2015 to cater for the introduction of the new reporting method. This means:

    • the debit interest transactions processed on or after 9 November 2015 with an effective date of 30 June 2015 or earlier will be included in the interest totals for the 2016 pre-fill report
    • the debit interest transactions processed on or after 1 July 2015 but before 9 November 2015 with an effective date of 30 June 2015 or earlier may be captured in the interest totals in several pre-fill reports – the 2016 and earlier year reports – depending on when interest was incurred.

    If you lodged your 2015 tax return before 9 November 2015 using ATO pre-fill data, you may need to adjust the 2016 pre-fill interest figures (see Example 4).

    The following may assist you to determine if adjustments will be needed:

    1. Did you have ATO interest in 2015?  
      • If no, no adjustment to 2016 data is needed.
    2. Did you lodge your 2015 return using pre-fill data before 9 November 2015?  
      • Adjust 2016 pre-fill data (see note) by any debit interest transaction with  
        • process date between 1 July 2015 and the date you lodged, and
        • effective date between 1 July 2014 and 30 June 2015.
    3. Did you lodge your 2015 return using pre-filled figures after 9 November?  
      • Adjust 2016 pre-fill data (see note) by any debit interest transaction with  
        • process date between 1 July 2015 and 9 November, and
        • effective date between 1 July 2014 and 30 June 2015.
    4. Did you lodge your return using non-prefilled figures?  
      • Manual calculation method required.

    Note: An adjustment will be needed to exclude any debit from 2016 pre-filling that has been included in the 2015 pre-filling report. This is done by reducing 2016 deductions – that is, increase 24Y or decrease D10. Adjustments to credit transactions are not needed.

    Recurring data issue

    In certain circumstances the business rules for the pre-fill reports don't correctly capture the interest data. For example, where a GIC deduction in an earlier year hasn't been claimed and there is a later year remission that doesn't have to be declared – we report the remission on the basis that a deduction has been or can be claimed. You should check your statements of account to ensure the accuracy of the pre-fill data before lodging your tax return.

    IOP and DRI paid to non-residents and reported on the ICA may be included in the interest reported to item 10 Gross interest. As tax has already been withheld by the Commissioner, the IOP and DRI doesn't need to be declared and should be excluded from the interest declared at this item to avoid being taxed twice. Refer to your statement of account.

    How the new reporting process works

    Example 1: Net amount of ATO interest is nil

    Chris has an outstanding debt with us and was charged $1,200 GIC in the period 1 July 2015 to 31 January 2016. Chris paid his debt and requested leniency with the charges. A full remission was granted on 31 January 2016. In this case, Chris has a $1,200 deductible interest expense and $1,200 assessable interest income (due to the GIC remission). Under the new approach, we will not provide pre-fill information as the net balance of the interest deductions and interest income is nil.

    Under the legislative rules, Chris would claim a deduction expense of $1,200 at label D10 and include interest income of $1,200 at label 24Y in the supplementary return. Under the new reporting approach, he will not declare ATO interest at these labels.

    End of example

     

    Example 2: Net amount of deductible interest

    Jenny has an outstanding debt with us and was charged $2,300 GIC in the period 1 July 2015 to 30 June 2016. There were GIC remissions of $56 in this period. Jenny lodged a credit amendment for the 2014 income year in the same period and this reduced the debt payable. The GIC debt was also reduced by $505. In this case, Jenny has a $2,300 deductible interest expense and $561 assessable interest income (due to the GIC remission and credit reduction). Under the new approach, we will report a $1,739 net deductible interest expense.

    Under the legislative rules, Jenny would claim a deduction expense of $2,300 at label D10 and include interest income of $561 at label 24Y in the supplementary return. Under the new reporting approach, Jenny will declare $1,739 at label D10.

    End of example

     

    Example 3: Net amount of assessable interest income

    John has an outstanding debt with us relating to the 2014 income year and was charged:

    • $1,265 GIC in the period 1 July 2015 to 30 June 2016
    • $981 GIC for the period 1 July 2014 to 30 June 2015.

    John lodged a credit amendment for the 2014 income year on 30 September 2015 which resulted in a refund. The GIC charged in the 2015 and 2016 income years was subsequently reduced to nil. In this case, John has a $1,265 deductible interest expense and $2,246 assessable interest income (due to the GIC adjustments in the 2016 income year). Under the new approach, we will report $981 net assessable interest (John would have claimed a $981 deduction in his 2015 tax return.)

    Under the legislative rules, John would claim a deduction expense of $1,265 at label D10 and include interest income of $2,246 at label 24Y in the supplementary return. Under the new reporting approach, John will declare $981 at label 24Y.

    End of example

     

    Example 4: Transitional year calculations – 2016 tax return only

    Eva has an outstanding debt with us relating to the 2014 income year:

    • $435 GIC was processed in the period 1 July 2015 to 30 June 2016 (this includes the $45 and $53 mentioned below).
    • $550 GIC was incurred in the period 1 July 2014 to 30 June 2015 (this includes the $45 mentioned below)
      • $45 processed 7 July 2015 with effective date of 30 June 2015 (end of year GIC calculation
      • $53 processed 10 November 2015 with effective date prior to 30 June 2015 (this amount will be included in the calculation of interest in 2016 only).

    Eva lodged her 2015 tax return on 30 August 2015 using ATO pre-fill data and declared a deductible expense of $505 ($550 – $45). She will need to consider whether to amend this return to declare the $53 imposed on her account after lodging the 2015 return, if she uses the legislative rules to calculate her entitlements.

    Under the new 2016 approach we will report $435 net deductible interest. Eva will need to adjust this total for the $45 claimed as a deduction in the 2015 return.

    Under the legislative rules, Eva is entitled to claim a deduction expense of $337 ($435 – $45 – $53) at label D10 in her 2016 tax return. Under the new reporting approach, Eva will declare $390 at label D10. She will not need to amend her 2015 tax return to claim the $53 processed in November 2016 as the new process results in the deduction being claimed in the later year

    End of example

    Manually calculating ATO interest deductions and income

    You must manually calculate the ATO interest you want to claim as a deduction or must declare as assessable income, where:

    • you haven't been provided pre-fill interest data but have been told there is an ATO interest amount
    • interest transactions were processed on your account in the period 1 July 2015 to 9 November 2015 with an effective date prior to 1 July 2015 and these were included in prior interest claims.

    You may wish to manually calculate the ATO interest where:

    • you prefer to report interest separately at labels D10 and 24Y in your tax return
    • you do not wish to rely on ATO pre-fill data
    • you want to determine which reporting method provides the best outcome for you.

    Note: See the discussion on the Transitional year adjustments.

    General rules for assessing ATO interest transactions

    Item 10 – Gross interest. This label includes the interest we've paid or credited to you (IOP, IEP, DRI).

    Legislative rules

    (The same business rules apply for the new reporting process.)

    Calculation:

    • Use the processed date to determine when interest is paid.
    • Report if there is a new credit balance.

    Item D10 – Cost of managing tax affairs. This label includes an interest charge we imposed on you (GIC, SIC, LPI).

    Legislative rules

    Calculation:

    • Use the processed date and effective date to determine when interest is incurred (Noting that GIC with an effective date of 1July that relates to interest imposed in the period prior to 1 July will be reported in that prior year).
    • Report net debit balance.

    Business rules for new reporting process

    Calculation:

    • Use the processed date.
    • Report if net deduction is greater than net income.

    Item 24Y – Other income. This label includes amounts of interest we imposed that have been remitted or recouped (GIC remissions/credit adjustments, SIC remission/credit adjustments and LPI remission/credit adjustments)

    It does not include cancellations, write-offs or released transactions.

    Legislative rules

    You must declare interest that has been remitted or reduced if you claimed a deduction, or can claim a deduction for the imposed interest.

    Interest is assessable in the year that it is remitted or recouped.

    Calculation:

    • Use the processed date to determine when the interest is recouped.
    • Report net credit balance.

    Business rules for new reporting process

    Calculation:

    • Use processed date.
    • Report if net income is greater than net deduction total.

    You will need to analyse your statements of account and review all interest transactions in the relevant timeframe. The examples below show how to calculate your interest amounts using the new reporting process and applying the legislative rules.

    Example 1: Statement of account #1 - Income tax
    Example 1: Statement of account #1 - Income tax

    Processed date

    Effective date

    Transaction description

    Debit

    $

    Credit

    $

    Running balance account

    $

    DR/ CR

    02/06/2015

    02/06/2015

    General interest charge (GIC) from 01 Jun to 02 Jun 2015

    5.46

    0.00

    13,003.94

    DR

    02/06/2015

    02/06/2015

    Remission of general interest charge (GIC)

    0.00

    -5.46

    12,998.48

    DR

    01/07/2015

    01/07/2015

    General interest charge (GIC) calculated from 02 Jun to 30 Jun 2015

    99.82

    0.00

    13,098.30

    DR

    01/07/2015

    01/07/2015

    Remission of general interest charge (GIC)

    0.00

    -99.82

    12,998.48

    DR

    01/08/2015

    01/08/2015

    General interest charge (GIC) calculated from 01 Jul to 31 Jul 2015

    107.40

    0.00

    13,105.88

    DR

    01/09/2015

    01/09/2015

    General interest charge (GIC) calculated from 01 Aug to 31 Aug 2015

    108.29

    0.00

    13,214.17

    DR

    01/10/2015

    01/10/2015

    General interest charge (GIC) calculated from 01 Sep to 30 Sep 2015

    105.64

    0.00

    13,319.81

    DR

    03/11/2015

    03/11/2015

    General interest charge (GIC) calculated from 01 Oct to 02 Nov 2015

    116.46

    0.00

    13,436.27

    DR

    01/12/2015

    01/12/2015

    General interest charge (GIC) calculated from 03 Nov to 30 Nov 2015

    99.61

    0.00

    13535.88

    DR

    01/12/2015

    01/12/2015

    Remission of general interest charge (GIC)

    0.00

    -99.61

    13,436.27

    DR

    02/01/2016

    02/01/2016

    General interest charge (GIC) calculated from 01 Dec 2015 to 01 Jan 2016

    113.93

    0.00

    13,550.20

    DR

    02/02/2016

    02/02/2016

    General interest charge (GIC) calculated from 02 Jan to 01 Feb 2016

    112.65

    0.00

    13,662.85

    DR

    02/03/2016

    02/03/2016

    General interest charge (GIC) calculated from 02 Feb to 01 Mar 2016

    102.56

    0.00

    13,765.41

    DR

     

    End of example

    Calculating ATO interest under the new process

    Identify the interest transactions processed in the period 1 July 2015 to 30 June 2016.

    Note: For the transitional 2016 year we adjust the report to exclude the GIC processed on 1 July as this was reported in the 2015 pre-fill report.

    • Total deductible interest = $107.40 + $108.29 + $105.64 + $116.46 + $99.61 + $113.93 + $112.65 + $102.56 = $866.54
    • Total assessable interest income = $99.82 + $99.61 = $199.43

    Net interest reported:

    Net deductible interest to report at item D10 = $866.54 – $199.43 = $667.11

    Calculating ATO interest under the legislative rules

    Identify the income year GIC was incurred (generally by the effective date of the transaction) and interest that was remitted or reduced (by the processed date of the transaction).

    Interest reported:

    • Total deductible interest expense to report at item D10 = $866.54
    • Total assessable interest income to report at item 24Y = $199.43
    Example 2: Statement of account #2 - Income tax
    Example 2: Statement of account #2 - Income tax

    Processed date

    Effective date

    Transaction description

    Debit $

    Credit $

    Running balance account

    DR/ CR

    26/09/2015

    05/06/2014

    Tax return individuals – Income Tax for the period from 01  Jul 2012 to 30  Jun 2013

    1,199.15

    0.00

    1,199.15

    DR

    26/09/2015

    21/11/2014

    Tax return individuals – Income Tax for the period from 01 Jul 2013 to 30  Jun 2014

    15,644.15

    0.00

    16,843.30

    DR

    26/09/2015

    26/09/2015

    Credit offset from Client Integrated Account

    0.00

    -9,343.00

    7,500.30

    DR

    29/09/2015

    01/07/2014

    General interest charge (GIC) calculated from 01 Oct 2013 to 30  Jun 2014

    8.52

    0.00

    7,508.82

    DR

    29/09/2015

    01/07/2014

    Remission of general interest charge (GIC)

    0.00

    -8.52

    7,500.30

    DR

    29/09/2015

    02/06/2015

    Amended general interest charge (GIC) calculated from 01  Jul 2014 to 01 Jun 2015

    926.45

    0.00

    8,426.75

    DR

    29/09/2015

    02/06/2015

    Remission of general interest charge (GIC)

    0.00

    -926.45

    7,500.30

    DR

    30/09/2015

    01/07/2014

    Amended general interest charge (GIC) calculated from 01  Jun 2013 to 30 Jun 2014** (see note)

    62.32

    0.00

    7,562.62

    DR

    30/09/2015

    30/09/2015

    Remission of general interest charge (GIC)

    0.00

    -62.32

    7,500.30

    DR

    ** Note: Denotes an account correction by the ATO. This may impact interest amounts in prior years depending on the reporting method you use.

    End of example

    Calculating ATO interest under the new process:

    Identify the interest transactions processed in the period 1 July 2015 to 30 June 2016.

    • Total deductible interest to report at item D10 = $8.52 + $926.45 + $62.32 = $997.29
    • Total assessable interest income to report at item 24Y = $8.52 + $926.45 + $62.32 = $997.29

    Net interest reported:

    Net deductible interest = $997.29 – $997.29 = $0.00

    There is no interest to be reported at items D10 or 24Y in the 2016 tax return.

    Calculating ATO interest under the legislative rules:

    The account adjustment by the ATO does not change the timing of the deduction for the GIC which is incurred in the 2014 income year. It corrects the GIC that can be claimed as a deduction in the tax return for that year.

    2014 income year:

    • Total deductible interest to report at item D10 = $62.32

    Note: You may need to amend your 2014 tax return if you wish to include this deduction with your other deductions claimed, if any.

    2016 income year:

    • Total deductible interest to report at item D10 = $8.52 + $926.45 = $934.97
    • Total assessable interest income to report at item 24Y = $8.52 + $926.45 + $62.32 = $997.29

    Note: The 2013 and 2014 tax returns were lodged late in the 2016 income year. The GIC of $8.52 and $926.45 imposed on the liabilities established by the notices of assessment for these income years, is incurred in 2016. The $62.32 is incurred in the 2014 income year as the account adjustment retrospectively alters the interest imposed in that year.

    See also:

    Last modified: 06 Jun 2017QC 49294