GIC & SIC Penalty Remission: How to Get the ATO to Reduce or Waive Late Lodgement and Shortfall Interest Charges

What Are GIC and SIC, and Why Do They Matter?

If you have ever received a letter from the ATO with an unexpectedly large tax bill, you may have noticed two extra amounts tacked on: the General Interest Charge (GIC) and the Shortfall Interest Charge (SIC). These are not just minor fees. They are compounding daily interest charges that can turn a manageable tax debt into a serious financial burden.

At Elite Accounting Solutions, we have helped dozens of clients across Melbourne's eastern suburbs successfully apply for remission of these charges. In many cases, the ATO has waived thousands of dollars in interest once the circumstances are properly explained. This guide explains exactly what GIC and SIC are, when the ATO applies them, and — most importantly — how you can request remission.

General Interest Charge (GIC): The Cost of Being Late

The General Interest Charge is the ATO's penalty for late payment or late lodgement. If you do not pay your tax by the due date, or if you lodge your tax return, BAS, or activity statement after the deadline, the ATO will charge GIC on the outstanding amount.

GIC is calculated daily and compounds, meaning it grows faster the longer you leave it. The rate is tied to the Reserve Bank cash rate plus a margin, and it is currently well above most commercial loan rates. The ATO is effectively saying: "You had use of this money, and now you need to pay interest for the delay."

GIC can be applied in many situations:

• Late payment of income tax, GST, or PAYG instalments
• Late lodgement of tax returns, BAS, or fringe benefits tax returns
• Overpayment of a refund that the ATO later recovers
• Unpaid superannuation guarantee charge debts
• Penalties that remain unpaid after the due date

The key point about GIC is that it is not a fixed fine. It is a running interest clock. A $5,000 tax debt that sits unpaid for six months can easily attract $300–$500 in GIC, and that amount keeps growing until the debt is cleared.

Shortfall Interest Charge (SIC): The Cost of Getting It Wrong

Shortfall Interest Charge is different. SIC applies when you have understated your tax liability — not because you were late, but because the amount you reported was too low. This happens when:

• You lodge a tax return with understated income or overstated deductions
• The ATO amends your return and finds additional tax owing
• You fail to declare a capital gain, foreign income, or business income
• The ATO disallows deductions you previously claimed

SIC is calculated from the day the tax was originally due until the day the ATO issues the amended assessment. The rate is slightly lower than GIC, but it can still add hundreds or thousands of dollars to your tax bill.

The ATO treats SIC more seriously than GIC because a tax shortfall suggests either carelessness or intentional underreporting. However, the ATO acknowledges that honest mistakes happen, and that is where remission comes in.

What Is Remission, and Can You Actually Get It?

Remission means the ATO reduces or waives the interest charge. It is not a payment plan. It is not a deferral. It is the ATO saying, "Under the circumstances, we will not charge you this interest."

The ATO has broad discretion to remit GIC and SIC under the Taxation Administration Act 1953. The decision is made by an ATO officer who weighs the facts against the ATO's published remission guidelines. You do not have an automatic right to remission, but if your case is well prepared, the ATO often grants at least a partial reduction.

We have seen clients receive full remission of GIC when the delay was caused by a serious illness, a natural disaster, or a tax agent error. We have also seen SIC partially remitted where the taxpayer had a reasonable basis for the original position, even if that position was ultimately incorrect.

The Two Grounds for Remission: Reasonable Cause and Special Circumstances

The ATO generally considers two broad categories when deciding whether to remit GIC or SIC:

1. Reasonable Cause — You Tried, But Something Went Wrong

The ATO will look at whether you took reasonable care to meet your obligations. If you made a genuine effort but were let down by circumstances beyond your control, this is your strongest ground.

Examples of reasonable cause include:

• Your registered tax agent made an error that you could not reasonably have detected
• A family member fell seriously ill, and you were the primary carer
• A bushfire, flood, or storm damaged your records or prevented you from meeting deadlines
• Your business accounting software failed or was corrupted
• You relied on advice from the ATO that turned out to be incorrect
• You were unable to access banking or internet services due to a system outage

The ATO will assess whether a reasonable person in your situation would have acted differently. If you can show that you did everything a reasonable taxpayer would do, the ATO is likely to look favourably on your request.

2. Special Circumstances — The Unusual and the Exceptional

Even if you did not take every reasonable step, the ATO may remit penalties and interest if there are special circumstances that make it unfair to hold you liable.

This category is broader and includes:

• Serious physical or mental illness affecting you or a close family member
• Financial hardship where paying the interest would cause severe distress
• Natural disasters or emergencies that disrupted your business or personal affairs
• Death of a key person in your business or family
• Legal proceedings that prevented you from managing your tax affairs
• Significant system failures by government or financial institutions

The ATO does not expect perfection. What they expect is honesty, documentation, and a genuine attempt to comply. When life gets in the way, the ATO's remission framework is designed to be a safety net — not a loophole.

How the Remission Process Actually Works

Here is the step-by-step process we follow when applying for GIC or SIC remission on behalf of our clients:

1. Review the assessment and identify the charges. We start by examining the ATO notice of assessment or statement of account to confirm exactly how much GIC or SIC has been applied and the date range.
2. Interview the client and gather the facts. We ask detailed questions about what happened, why the lodgement was late or why the shortfall occurred, and what evidence exists to support the claim.
3. Collect supporting documentation. This might include medical certificates, emails with tax agents, software failure reports, bank statements, or disaster declarations. We organise this into a clear, chronological narrative.
4. Draft the written submission. We prepare a formal submission that references the ATO's remission guidelines, explains the grounds for remission, and attaches all supporting evidence. The submission is addressed to the correct ATO officer and uses the correct legislative references.
5. Lodge the submission and follow up. We lodge the submission through the ATO portal or by mail, then follow up within 14 days to ensure it has been assigned to an officer. We track the progress and respond to any ATO requests for additional information.
6. Review the outcome and advise on next steps. If the ATO grants full or partial remission, we confirm the adjusted balance and advise on payment. If the ATO refuses, we review the decision and advise whether an objection or AAT review is worthwhile.

What the ATO Will Not Remit

It is important to be realistic. The ATO will not remit GIC or SIC if:

• You simply forgot to lodge or pay, with no exceptional circumstances
• You deliberately underreported income or overstated deductions
• You have a history of non-compliance and this is part of a pattern
• You had the money but chose to spend it on something else
• You blame your tax agent but cannot show the agent was at fault
• You delay the request for years without explanation

The ATO's remission process is not a get-out-of-jail-free card. It is a fairness mechanism. If you have a genuine case, it works. If you are looking for an excuse, the ATO will see through it.

Prevention: How to Avoid GIC and SIC in the First Place

The best way to deal with GIC and SIC is to never have them applied. Here is what we recommend to every client:

• Lodge on time, even if you cannot pay. The ATO treats late lodgement more harshly than late payment. If you lodge on time, you can usually negotiate a payment plan without GIC escalating as severely.
• Set up a payment plan early. If you know you will struggle to pay, contact the ATO or your accountant before the due date. A pre-approved payment plan attracts lower GIC than an unpaid debt that sits unmanaged.
• Review your tax agent's work. Before your return is lodged, ask your accountant to walk you through the key figures. If something does not look right, raise it before lodgement, not after.
• Keep records organised. Disorganised records lead to missed income, duplicated deductions, and amended returns. A clean set of books makes SIC far less likely.
• Monitor ATO correspondence. The ATO sends letters and myGov notifications. Do not ignore them. A $500 penalty notice ignored today can become a $2,000 debt with GIC in six months.
• Use a qualified, registered tax agent. Unregistered advisers or DIY software without professional review increase the risk of errors that trigger SIC.

When Should You Get an Accountant Involved?

You can apply for GIC or SIC remission yourself, and many people do. However, we strongly recommend involving an accountant for any of the following situations:

• The total GIC or SIC exceeds $1,000
• The ATO has already refused your initial request
• The shortfall involves complex issues like capital gains, trusts, or foreign income
• You believe your tax agent made an error
• You are considering an objection or AAT review
• You have multiple tax debts and need a holistic strategy

A well-drafted submission from a registered tax agent carries more weight than a self-lodged request. We know the ATO's internal guidelines, the correct legislative references, and the tone that gets results. More importantly, we know how to present the facts in a way that makes the ATO officer's decision easy.

A Real-World Example

We recently assisted a small business owner in Croydon who had accumulated $4,200 in GIC over 18 months after failing to lodge BAS statements during a family crisis. The ATO had issued multiple notices, and the debt was escalating.

We prepared a remission submission that documented the family illness, the impact on the business, the steps the client had taken to catch up, and the measures they had since put in place to prevent recurrence. The ATO remitted $3,800 of the GIC and accepted a 12-month payment plan for the remaining balance.

This is not an unusual outcome. The ATO wants to see genuine effort and a credible story. When the submission is prepared properly, the ATO frequently grants significant relief.

Final Thoughts

GIC and SIC are the ATO's way of enforcing compliance, but they are not set in stone. If you have a genuine reason for a late lodgement or a tax shortfall, the remission process exists to give you a fair hearing.

The key is preparation. A vague request with no evidence will be rejected. A detailed, documented submission that addresses the ATO's guidelines directly will often succeed.

If you have received an ATO notice with GIC or SIC, do not just pay it and move on. Call us first. We will review the charges, assess your grounds for remission, and advise you on the best path forward. The consultation is free, and the savings could be substantial.