Unpaid tax interest and penalties
Under tax administration laws, interest and penalties may apply when tax (including royalty) is not paid on time or has been under-assessed.
Unpaid tax interest
If tax is not paid on time, unpaid tax interest (UTI) will accrue on a daily basis until the tax, related penalties and fees, and accumulated interest are paid in full.
Interest accrues on payment plans until the debt is paid in full. (This does not apply to the land tax extended payment option unless second or third instalments are late.)
Interest may also apply if a document is not lodged on time.
To avoid paying UTI, pay your liability on time.
The UTI rate is 11.9% for the 2023–24 financial year.
The rate is reviewed annually. For a particular financial year, the rate is equal to the sum of the monthly average yield of 90-day bank accepted bills for the preceding May (rounded to the nearest second decimal point) and 8%.
UTI has 2 components:
- assessed interest—calculated at the time an assessment is made
- late payment interest (LPI)—calculated after an assessment is made and applied
- daily for royalty
- each Sunday for other taxes.
If you receive an assessment notice, it will include the amount of UTI (calculated on a daily basis) that applied at the date the assessment was issued.
The UTI start date will depend on the type of assessment and when the assessment is made. Section 54(5) of the Taxation Administration Act 2001 outlines the exact method of calculating the UTI start date.
|UTI start date (generally)
|First assessment—where information or lodgement requirements are met
|The day after the assessment due date
|First assessment—where information or lodgement requirements are not met (non-compliant)
|The day after the assessment due date, minus the number of days of non-compliance
|The same day as for the first assessment
For self assessors, we have more information on:
You must include all UTI when you pay your tax. Our calculators will help you to work out how much UTI you owe:
In some circumstances, we may remit all or part of the UTI. For more information, read the public ruling on remission of unpaid tax interest (TAA060.1). You can also contact us to lodge a UTI remission request.
Any payments you make will go towards UTI before being applied to the tax.
We may prosecute you if you commit offences such as:
- failing to comply with a notification or lodgement requirement
- knowingly providing false or misleading documents.
As an alternative to prosecution, penalty tax applies when we:
- issue a default assessment
- reassess a default assessment
- reassess, and the tax payable increases.
We may issue a default assessment if:
- you don’t provide information or documents we require on time
- we are not satisfied with the accuracy of documents that you give us
- it is necessary to make an immediate assessment.
Penalty tax is 75% of the tax amount on a default assessment, or 75% of the increase in tax on a reassessment. The penalty tax rate can be more if you hinder or prevent us from learning about your tax liability, or fail to notify us that an assessment was lower than it should have been.
Any payments you make will go towards penalty tax before being applied to the tax.
In some circumstances, we may decide to reduce the penalty tax.
For more information, read these public rulings: