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Ruling
Subject: General interest charge and remission
Question 1
Is the general interest charge (GIC) deductible in the income year it is imposed?
Answer
Yes.
Question 2
Is remitted GIC assessable in the income year it is remitted?
Answer
Yes.
This ruling applies for the following period
1 July 2010 to 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
Your tax return for the 2006-07 income year was lodged in January 2011.
Your 2006-07 notice of assessment issued in February 2011 showing an amount payable. The amount payable was due and payable on 21 November 2007.
As the amount payable was due in November 2007 GIC was imposed. The GIC was imposed in February and March 2011.
The GIC imposed in February and March 2011 was remitted in March 2011.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-10
Income Tax Assessment Act 1997 subsection 20-20(3)
Income Tax Assessment Act 1997 subsection 20-25(2A)
Income Tax Assessment Act 1997 paragraph 25-5(1)(c)
Taxation Administration Act 1953 section 8AAE
Taxation Administration Act 1953 subsection 8AAZF(1)
Reasons for decision
Question 1
Summary
GIC imposed on an amount that has not been paid by the due date for payment is deductible in the year that it is incurred. You incurred the GIC in the 2010-11 income year and are therefore entitled to a deduction for the GIC in the 2010-11 income year.
Detailed reasoning
If an amount of income tax that you are liable to pay remains unpaid after the time by which it is due to be paid, you are liable to the GIC on the unpaid amount (section 5-15 of the Income Tax assessment Act 1997 (ITAA 1997)).
The GIC is worked out under Part IIA of the Taxation Administration Act 1953 (TAA 1953).
You can deduct expenditure you incur to the extent that it is for the GIC (paragraph 25-5(1)(c) of the ITAA 1997).
In your case, you incurred GIC in the 2010-11 income year. As such, you are entitled to a deduction under paragraph 25-5(1)(c) of the ITAA 1997 for the amount of GIC incurred in the 2010-11 income year.
Note: While the amount of GIC was calculated from the due date for payment (21 November 2007) you are considered to have incurred the GIC when it was charged to your account (February and March 2011).
Question 2
Summary
The remitted GIC is included in your assessable income in the 2010-11 income year; the income year that it was remitted.
Detailed reasoning
Your assessable income includes amounts that are not ordinary income, but are included in your assessable income by provisions about assessable income (section 6-10 of the ITAA 1997).
Certain amounts received by way of insurance, indemnity or other recoupment are assessable income if the amounts are not income under ordinary concepts or otherwise assessable (subdivision 20-A of the ITAA 1997).
An amount you have received as recoupment of a loss or outgoing (except by way of insurance or indemnity) is an assessable recoupment if it is paid to cover the cost of a deductible expense and the deduction can be claimed in the current year or in an earlier income year (subsection 20-20(3) of the ITAA 1997). [Current year means the income year for which you are working out your assessable income and deductions].
If you have incurred expenditure that consists of general interest charge, and the Commissioner remits any of that charge, then you are taken to receive the remitted amount as recoupment of that expenditure (subsection 20-25(2A) of the ITAA 1997).
GIC is deductible under paragraph 25-5(1)(c) of the ITAA 1997 in the income year that it is imposed.
As you are entitled to a deduction for the GIC in the 2010-11 income year, and the Commissioner remitted that GIC, the remitted amount is an assessable recoupment in the 2010-11 income year under subsection 20-20(3) of the ITAA 1997.
Accordingly the remitted GIC is included in your assessable income in the 2010-11 income year.