Under the Taxation Administration Act 1997, interest and/or penalty tax may be charged for late payments of tax. It also constitutes an offence to fail to register for payroll tax, or to lodge returns, when required.
Interest, calculated on a daily basis, is automatically imposed when tax is not paid by the due date. There are two components to the interest rate - a ‘market rate’ and a ‘premium rate’ of 8 per cent per annum.
The market rate of interest is based on the 90-Day Bank Accepted Bill Rate determined by the Reserve Bank of Australia for the month of May in the financial year prior to the identification of the tax default.
Market interest is imposed to reimburse the Government for revenue lost due to the late payment of tax.
Premium interest is imposed to deter employers from using the State Revenue Office as a financier. The Commissioner will only remit interest in exceptional circumstances.
Penalty tax is incurred on tax defaults in addition to interest (a ‘tax default’ can be either a late payment or a tax shortfall). The rate of penalty tax depends on the culpability or the extent to which the taxpayer or their professional representative’s behaviour or actions contributed to the tax default and failed, in the Commissioner’s opinion, to demonstrate reasonable care.
The rate of penalty tax may be reduced when ‘reasonable care’ has been taken, where the tax default is attributable to circumstances outside a taxpayer’s control or when a voluntary disclosure is made to the Commissioner. Conversely, higher penalty tax may be applied when there has been hindrance during an investigation or concealment of an underpayment of tax.
An application for remission of interest or penalty tax must be made in writing to the Commissioner.
Refer to the payroll tax Interest and Penalty Tax ruling.