Tax plan doesn’t add up

The brains trust at the Australian Tax Office has come up with a new trap for the unsuspecting. It sends bills which behave like the magic pudding – they keep growing from the day they are posted and are incorrect from the day received.

The offending item is a process known as the General Interest Charge. That is a levy applied to naughty taxpayers who overlook tax assessments or pay them late.

Now, defending tax recalcitrants is not the job of Briefcase but there is a remarkable problem in the way the ATO levies its GIC. As well as applying a fine, the fine accrues interest from the time it is levied.

If this sounds complex, picture an example. On Friday, ABC Pty Ltd gets hit with a GIC of $100 for late payment.

Out goes the notice which includes the words that interest continues to accrue on a daily basis.

The letter arrives at ABC the following Monday. The manager pops down to the Post Office on Tuesday and pays the assessed amount – but, guess what, he’s wrong already because the GIC kept growing and in a few months time, he’ll get another notice with a fresh (admittedly smaller) GIC assessment.

What nonsense.

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