Shortfall interest charge (SIC) and how to get it remitted

Shortfall interest charge (SIC) is interest the ATO charges when it amends your income tax assessment and you owe more tax. It runs on the extra tax from the day tax on your original assessment was due until the day before the amended assessment, and the ATO can remit it where that is fair and reasonable (Taxation Administration Act 1953 (TAA), Sch 1 ss 280-100 and 280-160).

SIC usually follows an ATO audit or review, or your own request to correct a return. Its rate is lower than general interest charge (GIC), but it is no longer tax deductible. We prepare SIC remission requests as part of our GIC remission work.

What is the shortfall interest charge?

SIC exists so that people who under-assess don't get the advantage of a free loan over those who assess correctly (Sch 1 s 280-50). It is not a penalty: it applies whether or not you are liable to one (Sch 1 s 280-103(1)), and the ATO accepts that it doesn't imply fault (ATO practice statement PS LA 2006/8, para 7).

SIC applies mainly to income tax, and to a few other taxes such as Division 293 tax and petroleum resource rent tax (Sch 1 s 280-1).

Shortfalls of GST, PAYG withholding and fringe benefits tax attract GIC instead, at the higher rate, from the original due date (PS LA 2006/8, Table 1). Remission of that "shortfall GIC" is decided under TAA s 8AAG, with PS LA 2006/8 as the ATO's guidance.

How is shortfall interest charge calculated?

The period

SIC runs from the start of the day tax under your first assessment for the year was due (or would have been, if there had been any) to the end of the day before the ATO gave you notice of the amended assessment (Sch 1 s 280-100(2)). The original due date depends on the type of taxpayer and when the return was due (Income Tax Assessment Act 1997 (ITAA 1997) s 5-5).

If the amendment reinstates tax that an earlier amended assessment had reduced, the period for that part starts from the due date under the earlier amended assessment instead (Sch 1 s 280-100(3)).

The SIC rate

The SIC rate for a day is the base interest rate plus 3 percentage points, divided by the number of days in the calendar year (Sch 1 s 280-105(2); PS LA 2006/8 para 119). It compounds daily on the extra tax plus earlier SIC (Sch 1 s 280-105(1)).

The base interest rate is the monthly average yield of 90-day Bank Accepted Bills published by the Reserve Bank for a set earlier month, so it is reset each quarter (TAA s 8AAD(2)). GIC uses the same base rate plus 7 percentage points (TAA s 8AAD(1)). The ATO publishes the SIC rate each quarter: for October to December 2026 it is 7.51% a year, or 0.02057534% a day (ATO, "Shortfall interest charge (SIC) rates", last updated 4 September 2026).

When is SIC payable?

The ATO must give you a notice of the SIC amount (Sch 1 s 280-110(1)). SIC is due 21 days after that notice, and the extra tax 21 days after the notice of amended assessment (ITAA 1997 ss 5-10 and 5-5(7)). Anything unpaid after that attracts GIC (ITAA 1997 s 5-15), explained in how the general interest charge works.

Period	Charge	Rate	Remission power
Original due date to the day before the amended assessment	SIC	Base rate + 3 points	Sch 1 s 280-160, fair and reasonable
After the new due date, on anything unpaid	GIC	Base rate + 7 points	TAA s 8AAG, three set grounds

Paying the shortfall before the amended assessment issues doesn't stop SIC by law (PS LA 2006/8 para 72). But the ATO's guidance is to remit SIC for the period after you paid in full, less any interest on early payment you receive, with a proportionate remission if you paid only part (paras 73–74).

Can the ATO remit shortfall interest charge?

Yes. The Commissioner may remit all or part of SIC if the Commissioner considers it fair and reasonable to do so (Sch 1 s 280-160(1)). In deciding, the Commissioner must have regard to two principles (s 280-160(2)):

• remission should not happen just because the benefit you got from the temporary use of the money was less than the SIC, and
• remission should happen where the circumstances justify the Commonwealth bearing part or all of the cost of delayed payment.

That test is broader than the one for GIC. In N & M Martin Holdings Pty Ltd v Commissioner of Taxation [2020] FCA 1186, the Federal Court described s 280-160(1) as "a very general power" which, unlike s 8AAG(5), doesn't require special circumstances (at [98]). In separate judicial review proceedings heard with the related tax appeals, the Court set aside a refusal to remit a trust beneficiary's SIC because the decision maker had applied the GIC test instead (at [6], [99]–[100]). It didn't remit any SIC itself, but sent the decision back to the Commissioner to make again under the correct test (at [100]).

Remission can be full, or "to the base rate", which removes the 3-point uplift. How much is remitted depends on how far factors beyond your control drove the size and duration of the shortfall (PS LA 2006/8 para 10).

When does the ATO remit SIC under PS LA 2006/8?

PS LA 2006/8 was last updated on 30 July 2026 and is flagged as under review. Its examples are not exhaustive (para 16).

Situation	Usual outcome under PS LA 2006/8
Audit started unreasonably late, usually after halfway through the period of review	Base rate for the delay (paras 25–27)
Audit ran past the expected completion date the ATO gave you, with much the same scope	Base rate for the overrun (paras 28–30)
No ATO action for 30 days or more when the case could have progressed	Full remission for the unreasonable delay: para 40 counts the days beyond 30, though the ATO's own example remits the whole period (paras 39–46)
Your delay in supplying information was directly caused by a natural disaster, serious illness of you or key staff, family violence or other vulnerability	Full remission for the delay (para 57)
ATO slower than its service standard in processing your amendment request, once it had all the information	Full remission beyond the standard (paras 68–69)
You reasonably relied in good faith on ATO advice or its general administrative practice	No SIC to that extent (Sch 1 s 361-5), or full remission (paras 94–96)
You relied on a court or tribunal decision that clearly applied to you and was later overturned, or the law changed retrospectively	Full remission, if you sought an amendment within a reasonable time (paras 97–99, 103)

Telling the ATO about an error before it starts an audit or review is not, by itself, a ground for remission, and any remission is generally to the base rate (paras 63–66). See making a voluntary disclosure to the ATO.

What counts against remission

• Delay you caused. Missed appointments, or slow, partial or irrelevant answers to information requests (paras 30, 60).
• Fraud or evasion. The ATO says it should not normally remit SIC in these cases, even if it caused some of the delay (para 55).
• A mistaken view of the law. That is not the same as being unable to know about the shortfall when you lodged (para 102).
• Penalty outcomes. A reduced shortfall penalty doesn't mean reduced SIC (para 8). Penalty remission is a separate request (Sch 1 s 298-20).

How do you ask the ATO to remit SIC?

• In an audit. The ATO makes a remission decision whether or not you ask (except in fully automated data-matching cases), and you can give it information or ask for remission at any time during the audit (PS LA 2006/8 para 11). If a decision was made during the audit, you write asking for a review (para 15).
• After an automated amendment, or one you asked for. You generally need to ask and give the ATO the relevant information, although it may remit for its own processing delays or offsetting credits without being asked (paras 12–14).

If you ask in the approved form, the ATO must give written reasons for any refusal (Sch 1 s 280-165). A well-prepared request:

1. Sets out a dated timeline. The audit notice and its expected completion date, each ATO request and your reply, any ATO inactivity, and the amended assessment.
2. Ties each period to a ground. Full or base-rate remission, and the part of PS LA 2006/8 that supports it.
3. Deals with your own conduct. It shows you replied on time, or explains any delay.
4. Addresses the statutory principle. Why the Commonwealth should bear that part of the cost of delay (s 280-160(2)(b)).
5. Attaches the evidence. ATO letters, your replies and any ATO advice you relied on.

See how to ask the ATO to remit interest and what happens in an ATO audit.

An illustrative example

For example, suppose the ATO audits a company's 2022 return. The audit starts on 1 July 2024 with an expected completion date of 31 March 2025, but the amended assessment, adding $100,000 of tax, issues on 30 September 2025. The company answered every request on time, and the ATO left the file untouched for three months in late 2024.

Under PS LA 2006/8, the company could ask for full remission for at least the inactivity beyond 30 days, about two months (para 40), and remission to the base rate for the six months past the expected completion date (para 29). Because the ATO offsets full remission already given against the overrun, the base-rate remission would generally cover about four of those months (para 36).

What if the ATO refuses to remit SIC?

Can you object?

You can object under Part IVC of the TAA against a decision not to remit SIC if the SIC not remitted is more than 20% of the additional tax (Sch 1 s 280-170). In the example above, the SIC left would need to be more than $20,000. A partial remission can take you below the threshold and remove the objection right (PS LA 2006/8 paras 131–132). In practice, the test is usually met only where the shortfall period is long.

The objection is generally due within 60 days after you are served with notice of the remission decision (TAA s 14ZW(1)(c)).

In an audit, the remission decision may come with the letter finalising the audit. To be safe, count the 60 days from the date on that letter, not the day it reached you, and don't assume that asking for an informal review stops the 60 days running.

A late objection needs a written request explaining the delay, and the ATO decides whether to accept it (ss 14ZW(2)–(3) and 14ZX). If the objection is disallowed, you can generally apply to the Administrative Review Tribunal or appeal to the Federal Court within 60 days after you are served with the objection decision (ss 14ZZ, 14ZZC and 14ZZN). See how ATO objections work.

Below the 20% threshold

You can make a further request with better evidence or ask for an informal review (PS LA 2006/8, footnote 4). A refusal can also be challenged by judicial review in the Federal Court under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act) (para 130) or s 39B of the Judiciary Act 1903, as in N & M Martin Holdings. Judicial review asks whether the decision was lawfully made, not whether it was right. Its time limit is short: under the ADJR Act, generally within 28 days after you are given the written decision, or after the reasons are given if they come separately, although the Court can allow more time (ADJR Act s 11(1)(c) and (3)). See what to do if interest remission is refused.

Is shortfall interest charge tax deductible?

Not any more. You can't deduct GIC or SIC for income years starting on or after 1 July 2025, which for most taxpayers means 2025–26 onwards (ITAA 1997 s 26-5(1A); Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, Sch 2 item 4). What matters is the year the SIC is incurred, not the year the shortfall relates to.

Remitted SIC is treated as a recoupment (ITAA 1997 s 20-25(2A)), so if you deducted it, or can still deduct it, for an earlier year, the remitted amount is generally assessable (s 20-20(3)). For SIC that was never deductible, remission is a dollar-for-dollar saving. See ATO interest is no longer tax deductible.

How we help

• Check the calculation. The period, the amount and any credits on the amendment that may support remission.
• Build the request. We match each period of the audit to a ground under PS LA 2006/8 and draft the request against s 280-160, with any related GIC or penalty request.
• Challenge refusals. We object where the 20% threshold is met, and advise on other options where it isn't.
• Work with your accountant. If your accountant handled the audit, we work alongside them.

Next step

Send us the amended assessment and SIC notice, the ATO's audit or review letters (including the one giving the expected completion date), and a short timeline of when the ATO asked for information and when you replied. If the ATO has already refused remission, include its decision and the date you received it. In a first call we'll tell you which grounds look realistic, whether you have an objection right and how long you have.