General Interest Charge: What is It and How Does It Work?

 

If you have an unpaid tax debt, the Australian Tax Office (ATO) will charge you interest on it. This is called the general interest charge (GIC). You may receive a general interest charge (GIC) for various reasons, including non-payment or late payment of taxes. Many of you may have a lot of questions when you receive a GIC. If you receive a GIC, you can also ask your personal tax return accountant in Melbourne. In today’s blog, we’ll discuss what exactly GIC is, how it works and much more about it.

What does General Interest Charge Mean?

The general interest charge is imposed by the ATO if you have unpaid tax debts. You may receive GIC either for non-payment or late payment of taxes. It may be surprising when you receive GIC and you may get confused when you receive it.

How does the General Interest Charge (GIC) Work?

The GIC was introduced in July 1999. The reason behind this was to simplify the complex system of interest and penalty notices that were earlier imposed for unpaid or late tax liabilities. A tax accountant in Melbourne knows everything about tax-related matters. Thus, you can seek help from them to know why the ATO charges interest on tax debts. The GIC will be charged if:

• An amount of tax, levy, charge or penalty is unpaid or paid late.

• The wrong tax amount is paid because of not accurate estimated income tax statement.

On most taxes, GIC is charged, including income tax, goods and services taxes, fringe benefits tax, and pay-as-you-go (PAYG).

Are You Allowed to Cancel Your General Interest Charge (GIC)?

If extenuating circumstances were the reasons for a delay in payment, then a remission application can be applied. A remission of GIC indicates the cancellation or reduction of the penalty. Generally, the ATO will consider situations that made you unable to pay your tax debts, such as natural disasters, sudden ill health or industrial action. If the ATO deems that it was your fault for unpaid or late payment of taxes, then they will consider whether the situation could have been overlooked or not. In some situations, the ATO may reduce payment or delay a payment plan if the payment would cause financial hardship.

If you are confused about whether a GIC has been charged accurately or you are struggling to make payment for tax, then it s advisable to seek help from a tax accountant in Melbourne.

How often is the general interest charge updated?

The ATO calculates the GIC rate quarterly. The ATO keeps on updating the taxpayers about new tax rules and regulations. The ATO publishes GIC rates around 2 weeks prior to the start of each quarter.

Is GIC a penalty?

The GIC is a penalty notice and it is charged by the ATO for unpaid or late payment of taxes. If you are receiving a GIC, then it is a serious matter, and you need to deal with it as soon as possible. The reason behind this is that interest will incur on the GIC debt daily until you make the full payment. Despite this, if you are facing issues because of inaccurate business records, then you can seek help from a bookkeeper for small businesses.

Have you been ever charged a GIC?

Have you ever received a general interest charge from the ATO? Expert tax accountants can help you with this matter. The tax accountant will help assess your tax affairs. If there is a need to submit a remission request, then accountants can help.

Conclusion

The blog is all about general interest charge, how it works, and whether you can apply for remission or not. If you are receiving GIC, then you can ask your tax accountant to look after this matter. For the year the GIC was incurred, you would be eligible to claim a deduction in your tax return. It comes under the category of the Cost of managing tax affairs. Tax accountants can help you avoid paying more than required by managing everything. Moreover, if you want to seek help managing tax-related matters, then you can also contact Melbourne Accounting Firm.

Asset Write-Off Rules Described by Tax Accountant Melbourne

Tax accountant Melbourne said that the government recently approved a number of amendments to the tax laws, to protect the Australian economy from the effects of the Coronavirus. This includes new accelerated depreciation rules, adjustments to the instant asset write-off regulations, and restrictions on the write-off of SBE general pools. 

The government has essentially only revised certain important levels within the current instant asset write-off laws, making the adjustments in this area in some ways rather simple. Generally speaking, the modifications are:

·        A rise in the low pool value criteria from $30000 to $150000

·        The instant asset write-off cost level is from $30000 to $150000

·        The turnover requirements for depreciating asset deductions from $50 million to $500 million

Melbourne accounting firm claims that depending on whether you are working with a small business entity or a medium business firm, the eligibility rules may be slightly different.

The following prerequisites must be met for a small business organization to be eligible for the $150000 instant asset write-off threshold:

·        The company must operate under generally accepted business practises

·        Must generate annual combined revenue of less than $10 million

o   Based on 2019 or 2020 income year figures

o   It must decide to use the simplified depreciation rules for the 2020 income year

o   The asset must be purchased after 7:30 p.m. AEST on May 12, 2015

o   Professionals of accounting in Melbourne said that it must be used for the first time, or installed in a state of readiness for use, for a taxable purpose between March 12, 2020 and June 30, 2020.

The instant asset write-off rules will not be available to a small business organisation if it chooses not to use the simplified depreciation rules in the 2020 income year, regardless of whether the other prerequisites can be satisfied.

If the following criteria are met, entities that are not considered small business enterprises can access the $150000 instant asset write-off threshold.

·        The organisation must operate under general rules

·        It must have a combined yearly revenue of at least $10 million but not more than $500 million

o   Small business accountants said that based on data from the 2019 or 2020 tax year

o   The item must be purchased after 7:30 p.m. AEST on April 2, 2019

o   The asset must be first utilised, or installed and ready for use, between March 12, 2020, and June 30, 2020 for a taxable purpose.

The instant asset write-off rules are open to businesses with a turnover of $10 million or more but less than $500 million, however, they are not eligible for the general pool rules, which are available to a small business organisation with revenue of less than $10 million. 

Melbourne accounting firm said that in all of the prerequisites for claiming an instant deduction in regard to an asset are satisfied, the taxpayer may do so in the year the asset is first used (or installed and made ready for use) for a taxable purpose. The deduction is only permitted to the extent of the asset’s taxable purpose. Applying the business use percentage comes after first determining if an immediate deduction is possible based on the asset’s total cost.

Tax accountant Melbourne said that the entire cost of the asset on 30 June 2020 must be less than $150000 in order for an immediate deduction to be granted.

The first element of cost and the second element of cost are combined to form the cost of a depreciating asset under Division 40 ITAA 1997. The amount paid or assumed to have been paid in relation to beginning to possess that asset under section 40-180 is included in the first element of cost (e.g. a purchase price). After the taxpayer begins retaining the depreciating asset in accordance with section 40-190, the second element of cost comprises a sum paid or taken to have been paid in relation to bringing the depreciating asset to its current condition and location (e.g. improvements or delivery costs).

Experts of accounting in Melbourne claim that the portion of the sale profits that was used for business purposes must typically be included in assessable income when an asset that was initially eligible for an instant deduction is later sold. When assets are lost or destroyed and some proceeds (such as insurance proceeds) are received, similar restrictions apply.

Summary

Reliable Melbourne Accountants delivers skilled small business accountants to individuals and companies with professional accounting services. We deliver our services at very reasonable rates.