Early warning signs tax interest and penalties are building up
Your ATO account balance is growing faster than the original tax
An unpaid tax debt does not sit still. The general interest charge compounds daily on the unpaid amount, and penalties may be added for late lodgement or incorrect reporting.
Compare the balance shown in your ATO account with the original liability. If the difference has grown to several thousand dollars or more, interest and penalties are accumulating. Check the itemised statement to see exactly what has been added.
You can view your account balance and transaction history through ATO online services or by contacting the ATO. Keep a copy of each statement so you can track the rate of increase.
A payment arrangement is in place but the balance is not falling
If you have agreed to an ATO payment plan, the instalments should reduce the total balance over time. When the balance stays the same or continues to rise, the instalments are covering only part of the interest charge, and the original debt is not being paid down.
Log the total owing at the start of each month and compare it to the amount after your instalment is credited. If three months pass without a meaningful reduction, the arrangement may not be sustainable.
Continuing a payment plan that does not address both the debt and the interest does not stop further enforcement action. The ATO expects a plan to clear the account within a reasonable period.
Source: ATO: Payment plans
You are prioritising supplier payments over tax because cash is tight
When available cash is limited, it can feel necessary to pay suppliers, wages or rent first and defer tax payments. That choice has consequences: the tax debt continues to attract interest, and the ATO may take formal recovery action.
Make a note of each tax lodgement or payment due date that you have missed or deferred. If you are consistently paying other creditors while leaving ATO obligations unpaid, the interest and penalty charges will continue to build.
The ATO considers your payment behaviour when deciding whether to approve a payment plan or remit charges. A pattern of paying other creditors while ignoring tax obligations makes both outcomes less likely.
Lodgements are overdue and you have not asked for an extension
Late lodgement can trigger failure to lodge penalties. These penalties apply even if the final assessment shows a refund or a small liability. They are separate from the interest charged on unpaid amounts.
Check your lodgement obligations for activity statements, income tax returns and other reports. If a due date has passed and you have not lodged or arranged a deferral through your registered agent, a penalty may already be accruing.
Contact your tax agent or the ATO before the due date if you cannot lodge on time. Requesting an extension in advance is treated more favourably than explaining a delay after a penalty has been imposed.
What to check now before remission becomes harder
Remission of interest and penalties is more likely when you approach the ATO early, demonstrate circumstances outside your control, and show a prior history of on-time lodgement and payment. Delays weaken that case.
Gather your ATO account statements, correspondence, payment plan documents and any records that explain why an obligation was missed. Separate confirmed events such as natural disaster, serious illness, sudden debtor collapse or family violence from general business pressures. The ATO treats these circumstances differently.
Check how long the interest and penalties have been accumulating, whether you took steps to limit the delay, and whether your overall compliance record supports a remission request. If circumstances beyond your control contributed to the late payment, document them now while the evidence is available.
A remission request for amounts over two thousand five hundred dollars is referred to a dedicated team and will not receive an immediate decision. The onus is on you to satisfy the ATO that remission is warranted, so clarity and supporting evidence matter.
Next steps when interest or penalties are already accruing
Start by confirming what you owe and why. Request an itemised account statement from the ATO if you do not already have one. Identify which charges relate to the original tax, which are interest and which are penalties.
If a circumstance outside your control caused the delay, prepare a clear explanation and gather supporting documents such as medical certificates, police reports, correspondence from debtors or evidence of natural disaster. Submit a remission request through ATO online services or, for smaller amounts, by telephone.
If cash flow is the issue, consider whether a revised payment arrangement is realistic. General business conditions, customer late payment and reinvesting available funds instead of paying tax are not usually accepted as grounds for remission.
CRP works with construction businesses on tax debt, compliance and turnaround situations. Use the contact form below to explain your position. Tax advice and remission applications must be handled by your registered tax agent or an appropriately qualified professional engaged for that work.
Source: ATO: How to request a remission of interest and failure to lodge penalties