5.5 You must pay your income tax for a financial year when it becomes due and payable.
AND
Income tax becomes legally "due and payable" only after the Commissioner issues an assessment (original or amended).
“However, if the Commissioner does make an assessment of your income tax for the year, the tax may be taken to have been due and payable at a time before your assessment was made.”
- Original Assessments
Self-Assessment Entities (e.g., companies, trusts):
Due on the 1st day of the 6th month after the income year ends (e.g., 1 December for a 30 June year-end).
Other Taxpayers (e.g., individuals):
Due 21 days after the tax return lodgement due date (or 21 days after the assessment notice if lodged early).
- Amended Assessments
Any additional tax from an amended assessment is due 21 days after the amended notice is issued.
5-1o Shortfall Interest Charge (SIC)
An amount of SIC is due & payable 21 days after the day on which commissioner gives you notice of charge.
5-15 General Interest Charge (GIC)
If an amount of income tax or *shortfall interest charge that you are liable to pay remains unpaid after due to be paid, you are liable to pay the general interest charge on the unpaid amount for each day in the period that:
(a) from the beginning of the day on which the amount was due to be paid; and
(b) to the end of the last day on which, if the income tax, shortfall interest charge & general interest charge applied on Income tax and SIC are unpaid:
Decoding "Due & Payable" under Income Tax Act - Australian Taxation
When Does Your Tax Truly Become Due? Understanding "Due and Payable" in Australia
Taxation in Australia operates on a self-assessment system, but the exact moment your tax liability becomes "due and payable" isn’t always straightforward. What happens if you underpay accidentally? Why does the ATO charge interest before you even know you owe extra?
We can break down the rules under Section 5-5 of the Income Tax Assessment Act and explains why the ATO can impose backdated interest—even if you weren’t aware of the debt.
The Core Rule: Tax is "Due and Payable" Only After Assessment
Under Section 5-5, your income tax becomes legally due and payable only when:
✅ The ATO issues an assessment notice (original or amended).
✅ The Commissioner formally demands payment.
This means:
- You cannot be forced to pay before assessment.
- The ATO must calculate your liability first.
Example:
- You earn 100K in FY2023−24 but mistakenly withhold tax on only 90K in FY2023−24
- You file your return on 1 July 2024, declaring $90K.
- The ATO later amends your assessment to $100K on 15 May 2025.
- Due Date: The extra tax is payable 21 days after the amended notice (e.g., 5 June 2025).
The Twist: Shortfall Interest (SIC) Applies from the Original Due Date
Here’s where things get interesting:
🔹 Even though the ATO only demands payment after assessment, the law treats the debt as existing from the original due date.
🔹 Shortfall Interest Charge (SIC) applies from the date the tax should have been paid (e.g., 21 November 2024 for individuals).
Why?
- The ATO considers the unpaid tax an "interest-free loan" to the taxpayer.
- It ensures fairness—those who pay on time aren’t disadvantaged.
- It discourages late reporting errors (intentional or not).When Can You Avoid SIC?
The ATO may remit (waive) interest if:
✔ The error was genuine and unintentional (e.g., employer withheld incorrectly).
✔ You voluntarily disclosed the mistake before an audit.
✔ The ATO took too long to amend (e.g., over 2 years). -
What Should You Do If You’ve Underpaid?
- Check Past Returns – Did you accidentally underreport income?
- Lodge an Amendment – Correct errors before the ATO catches them.
- Negotiate a Payment Plan – Avoid GIC (11% p.a.) by paying on time.
- Seek Professional Advice – A tax agent can help dispute unfair charges.
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