ATO Remission of Interest Charges & Penalties – What Accountants Need to Know in 2026

ATO Remission of Interest Charges & Penalties – What Accountants Need to Know in 2026

As clients continue to navigate tax pressures and mounting ATO liabilities, understanding the current remission framework is more important than ever. Recent procedural changes and shifts in interest deductibility mean accountants should closely review how they prepare, document, and submit remission requests.

Below is a practical, accountant‑focused breakdown of what’s changed – and what you need to keep front of mind.

What “Remission” Really Means

The ATO may, at its discretion, reduce or cancel:

• Interest charges: General Interest Charge (GIC) and Shortfall Interest Charge (SIC)
• Administrative penalties including failure to lodge (FTL) penalties.

Remission is not automatic. It hinges on whether the ATO considers remission “fair and reasonable” given the circumstances.

When the ATO Will Consider Remission

Remission is more likely where the taxpayer’s situation involved:

Factors Outside Their Control

• Serious illness or injury
• Natural disasters or unforeseen disruptions
• Third‑party errors affecting timely compliance

ATO‑Related Issues

• ATO processing delays
• Late or unclear information from the ATO

Genuine Attempt to Comply

• Where the taxpayer took reasonable steps but was hindered by events they couldn’t anticipate.

For interest charges specifically, remission may also be considered if:

• The taxpayer paid the amount before a later amended assessment, or
• Other “fair and reasonable” factors apply.

Important: Ordinary cash‑flow pressures or general business difficulties typically do not meet the threshold on their own.

How to Lodge a Remission Request

Requests can be submitted:

Online

• Through ATO Online Services for agents or businesses.

In Writing

Including essential details such as:

• Taxpayer identifiers (TFN/ABN)
• Relevant reference numbers
• The amounts being disputed
• A thorough explanation outlining why remission is justified

Supporting documentation is critical – e.g. medical certificates, email trails, third‑party statements, ATO correspondence, and timelines.

Key Changes Taking Effect 22 January 2026

From 22 January 2026, remission requests for interest and failure to lodge penalties must be submitted via the ATO’s prescribed online forms, not over the phone.

This move aims to standardise assessments but increases the importance of completeness, clarity, and substantiation in each request.

Remission vs Objection – Don’t Mix Them Up

Certain penalties cannot be remitted and must instead be formally objected to.

Examples typically routed via objection include:

• Shortfall penalties
• Penalties for false or misleading statements

Submitting a remission request when an objection is required can delay resolution – and frustrate clients.

Strategic Update: Interest Deductibility Rules Have Changed

From 1 July 2025, GIC and SIC on tax debts incurred on or after that date are no longer tax deductible.

This means:

• Interest is now a real cost unless successfully remitted.
• Any interest incurred before 1 July 2025 may still be assessable if remitted, as it was previously deductible.

These changes increase the financial impact of delayed tax management – making timely remission strategies even more important.

Practical Tips for Accounting Professionals

1. Act early
   File remission requests promptly once the issue is identified.
2. Provide strong evidence
   Clear timelines, medical documentation, correspondence logs, and supporting statements strengthen applications significantly.
3. Choose the right pathway
   Know whether the issue requires remission or objection.
4. Leverage updated ATO online forms
   Ensure your workflow aligns with the 2026 digital‑only submission requirements.

Final Thought

Remission remains a valuable tool – but with tightening ATO scrutiny and the shift in deductibility rules, accountants must prepare more comprehensive, well‑supported submissions. By being proactive and thorough, you can help clients navigate their tax difficulties with greater clarity, fairness, and financial efficiency.