The ATO said businesses are entitled to interest on early payments for certain liabilities if they are received more than 14 days before the due date.
“From March 2022, we are automatically identifying, calculating and paying Interest on Early Payment (IEP) entitlements directly into your nominated bank account,” the ATO said.
“This process applies to eligible early payments made from 1 July 2021.”
For eligible payments made after 13 March 2022, the ATO is paying IEP entitlements generally within two weeks of the due date of the liability.
Between 1 July 2021 and 13 March 2022, it will be paying IEP entitlements from 14 March 2022.
“If you have an existing tax debt, your IEP entitlement will be offset against the debt and any excess IEP amount will be paid to your nominated bank account,” the ATO said.
“You will receive a statement of account notifying you of your IEP entitlement when it is paid to you or offset against an existing debt.”
The automation of IEP means that tax professionals will no longer need to contact the ATO to request payment of future IEP entitlements.
Interest on early payments is assessable income and needs to be included in the tax return in either the income year when it receives the interest and the income year when it is offset against the tax debt.
Liabilities included in the IEP scheme include:
- Income tax (including Medicare levy and Medicare levy surcharge)
- Compulsory Higher Education Loan Program (HELP) repayments
- Compulsory Vocational Education and Training Student Loan (VETSL) repayments
- Student Financial Supplement Scheme (SFSS) assessment debts
- Compulsory Student Start-up Loan (SSL) repayments
- Compulsory ABSTUDY Student Start-up Loan (SSL) repayments
- Compulsory Trade Support Loan (TSL) debt repayments
- Interest on distributions from non-resident trust estates
- Shortfall interest charge (SIC)
Tony Zhang is a journalist at Accountants Daily, which is the leading source of news, strategy and educational content for professionals working in the accounting sector.
Since joining the Momentum Media team in 2020, Tony has written for a range of its publications including Lawyers Weekly, Adviser Innovation, ifa and SMSF Adviser. He has been full-time on Accountants Daily since September 2021.