Why ATO interest catches business owners off guard
The general interest charge is one of the least understood parts of a tax debt. Many owners assume that once they start making payments, the balance simply goes down. In reality, GIC is typically calculated daily on the unpaid amount and compounds daily, which means a debt can grow even while instalments are being paid.
Because the GIC rate is published and changes quarterly, an estimate from a prior quarter should never be treated as current. That uncertainty is exactly why this topic generates so many questions.
The core concepts: how GIC is calculated and when it can be reduced
GIC accrues on certain unpaid tax liabilities, generally compounding daily on the outstanding balance. It continues during most ATO payment arrangements unless the ATO agrees otherwise. Separately, the ATO may remit some or all GIC in eligible circumstances, but remission is a decision made under ATO rules, not an automatic entitlement.
Comparing GIC with the cost of a business loan requires looking at total cost over the full term — a lower headline rate on one side can still produce a higher total cost once fees and timing are included.
How our guides on this topic connect
These articles cover the mechanics of GIC, how to check the current rate, how to ask for remission, and how GIC compares with a business loan.
Where finance fits once you understand the interest
Once you know how GIC is accruing on your balance, our ATO GIC calculator lets you model the interest using a rate you enter, rather than an assumed figure, so you can see the impact of waiting versus paying down the debt sooner.
If the comparison points towards external finance, our ATO debt loans page explains how business loans work as a way of settling the ATO balance and replacing it with a lender repayment.
A practical way to approach this topic
Treat the official ATO rate table as your only reliable source for the current GIC rate, and use our calculator only as an estimate built on a rate you supply. From there, you can sensibly compare the cost of leaving a debt with the ATO against the cost of refinancing it.
If your accountant believes a remission request may be appropriate, prepare a clear, factual explanation of what happened and when, since the ATO assesses these requests on the evidence provided rather than on the size of the debt alone.
Key takeaway
GIC is not tax-deductible from 1 July 2025, which makes understanding and managing it even more important. Check the official current rate before relying on any estimate, and speak with your accountant about whether a remission request or a comparison with finance makes sense for your situation.