Tax Pre-Payment
A pre-payment is a payment made in advance for an expected tax bill. A business can make pre-payments at any time to make it easier to manage its tax. Some tax liabilities qualify for early payment interest when the payment is made more than 14 days before the due date. If you are eligible for interest on early payments, you can calculate how much they should receive using the credit for interest on early payments calculator.
Any payments made towards tax liabilities before they are due will remain on the integrated client account unless you request a refund. If a business has a tax debt, pre-payments may be used to offset against it.
To assist you in making regular pre-payments, we can estimate the amount to pay by using the ATO online tools and calculators. Voluntary payments can be made using any payment method – Bpay, credit card, direct credit, direct debit, cheque or in person at Australia Post outlets.
Early Payment of Tax
A tax payment made for certain tax debts (as set out below) will qualify for early payment interest if the payment is made more than 14 days before the due date. Early payment interest is payable on the following:
- Income tax (including Medicare levy and Medicare levy surcharge)
- Compulsory Higher Education Loan Program (HELP) repayment amounts
- Student Financial Supplement Scheme assessment debts
- Interest on distributions from non-resident trust estates
- Income tax penalties for late lodgement of returns in the 1999–2000 and earlier income years
- A general interest charge relating to a late tax return for the 1999–2000 and earlier income years
- A general interest charge on increase in tax payable resulting from an amended assessment for the 1999–2000 and earlier income years
- A shortfall interest charge
The following payments do not attract early payment interest:
- Pay as you go (PAYG) withholding amounts including
- amounts withheld from interest, dividends and royalties
- amounts withheld by payers (including those withheld for the purpose of repaying contributions or debts under HECS-HELP)
- PAYG instalments
- Any part of a payment that exceeds the amount that is due and payable
- Activity statement payments
How to Claim Your Interest on Early Payment
There are two ways to claim any credit interest. You can claim it as a credit on your tax return (supplementary section) for the income year in which the entitlement to the interest arises, (if it is 50 cents or more); to do this you will need to calculate the amount of your entitlement. You can also write to the ATO requesting payment of the interest; the interest will not be paid until after the due date for payment of the relevant tax liability.
A credit for early payment interest may not be claimed if the entity is also entitled to claim interest on overpayment on that early payment.
How to Work out the Period of Which Interest is Payable
For most taxpayers, interest is payable from the later of the date of issue of the tax liability notice or the date payment is made. Interest is payable up to and including the due date for payment, but only up to the value of the tax bill.
More detail and examples are available at the ATO – Early Payment of Tax.
Related References
