Tax Debt Corner: The Tax Ombudsman’s GIC Review — The Broker Read
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The Tax Ombudsman released her GIC remission review this month. Ruth Owen followed it up with a direct address on the findings. It’s a significant piece of work, and the most substantial independent scrutiny of the ATO’s approach to GIC remission in years.
Most of the coverage has focused on what it means for accountants, advisors, and taxpayers engaging with the ATO directly. This is the broker read.
What the review actually found
GIC is the ATO’s general interest charge, currently 10.65% per annum and increasing to 10.96% next month, applied to unpaid tax debt. It compounds. On a debt that’s been accumulating for a few years, GIC and penalties can represent 30 to 50 percent of the total balance.
The Ombudsman found that only 0.6% of eligible taxpayers were applying for remission. Refusal rates were high. And critically, when an application was refused, there was no formal internal pathway to challenge the decision. The Federal Court was essentially the only option, and not realistic for most clients.
The review changes that. There is now a formal reconsideration pathway built into the process. A refused application is no longer necessarily the end of the road.
Why this matters at settlement
Here’s the scenario brokers will recognise.
A client has ATO debt. They’re in a payment plan, compliant, which is what lenders need to see. Approval comes through. But the debt needs to clear at payout, and the lender will only fund to a certain LVR. The portal shows $150,000. The numbers don’t stack.
What the portal doesn’t tell you is the composition of that balance. If $50,000 of that $150,000 is GIC and penalties, a successful remission application changes what actually needs to be paid out. The deal that doesn’t work at $150,000 might work at $100,000.
That arithmetic is why the Ombudsman’s review matters to broker deals specifically. The reconsideration pathway means applications that were previously refused, with no avenue to challenge, now have a formal next step.
Three scenarios worth revisiting
The first is deals currently in progress where the numbers are tight at settlement. Before assuming the ATO balance is fixed, it’s worth asking whether anyone has looked at the GIC component and whether a remission application has been made.
The second is deals that fell over in the last year or two because remission was refused and the balance couldn’t come down enough for the deal to work. The reconsideration pathway is new. Some of those situations may have a different answer now.
The third is deals where the numbers do stack. The client can borrow the full amount and the deal settles at $150,000. Remission is still worth pursuing after the deal settles. If $50,000 of that balance is GIC and penalties and the ATO remission application is successful, that $50,000 comes back to the client. Working capital they weren’t expecting, delivered after the deal is done. That’s a conversation worth having before you assume the job is finished at settlement.
What you need to know
You don’t need to manage remission applications. That’s our work. What you need to know is that the number on the portal is not always the number that matters, and there is now a more robust process for reducing it than there was six months ago. That applies whether the deal is tight or the deal has already settled.
If you’ve got a deal where ATO debt is the sticking point, or a client who settled recently with ATO debt in the mix, it’s worth a conversation before you move on.
Tax Debt Corner is Tax Assure’s bimonthly series in partnership with CAFBA.
Questions about a specific scenario? Email [email protected] and we’ll cover it in an upcoming edition.
