Show at W only the calculated interest amount of 50 cents or more for early payment - do not show actual payments.
Early payment interest is payable only where the tax is actually paid more than 14 days before the due date for payment. Amounts that may attract early payment interest include payments of:
- income tax (including Medicare levy)
- a shortfall interest charge.
Amounts that are not directly paid but are reduced by the crediting or applying of an amount do not attract early payment interest, these amounts include:
- credit for instalments payable under the PAYG instalment regime
- credit for amounts withheld from withholding payments under the PAYG withholding regime
- an overpayment of other income tax liabilities
- a running balance account (RBA) surplus
- any other credit entitlement arising under a taxation law.
Early payment interest is also not payable on:
- any component of the payment that exceeds the amount due
- an amount for any period during which that amount also attracts interest on overpayment.
For taxable trusts, early payment interest is calculated from the later of:
- the date of issue of the notice notifying the amount of tax or interest, or
- the date the early payment is made.
Interest is payable up to the due date for payment, but only on the amount of payment up to the value of the debt.
However, where an amount that is paid early is refunded before the day it becomes due and payable, interest does not accrue on the amount for any period after the day it is refunded.
Date of payment is the date:
- shown on the receipt from the ATO or post office, or
- the payment is posted to us, plus three days, or
- shown on the taxpayer's bank statement where payment is made through direct debit - that is, electronic funds transfer (EFT).
Table 5 Interest rates for early payments calculation
Interest rate (p.a.)
If the early payment extends over two or more interest periods, calculate the interest for the number of days in each period.
Interest is calculated as follows:
Interest equals the number of days 365* multiplied by the amount of payment multiplied by the interest rate for period
* 366 for a leap year.
Keep a record of the amount of early payment interest claimed - this interest is assessable as income in the income year it is paid or credited against another liability.