Item 7 - Credit for interest on early payments

Label W - Amount of interest

Use the Early payment interest worksheet (epi) for the system to calculate the EPI and integrate the amount to label W.

Show at label W only the calculated interest amount of 50 cents or more for early payment. Do not show the amount of the actual payments made.

Early payment interest is payable only where the tax is actually paid more than 14 days before the due date for payment. Amounts which may attract early payment interest are payments of:

income tax (Including Medicare levy)
A shortfall interest charge

Amounts which are not directly paid but are reduced by the crediting or applying of an amount do not attract early payment interest. These amounts include:

credit for instalments payable under the PAYG instalment regime
credit for amounts withheld from withholding payments under the PAYG withholding regime
an overpayment of other income tax liabilities
a running balance account (RBA) surplus, and
any other credit entitlement arising under a taxation law.

Early payment interest is also not payable on:

any component of the payment that exceeds the amount due, and
an amount for any period during which that amount also attracts interest on overpayment.

For taxable trusts, early payment interest is calculated from the later of:

the date of issue of the notice notifying the amount of tax or interest, or
the date the early payment is made.

Interest is payable up to the due date for payment, but only on the amount of payment up to the value of the debt.

However, where an amount that is paid early is refunded before the day it becomes due and payable, interest does not accrue on the amount for any period after the day it is refunded.

Date of payment is:

the date shown on the receipt from the ATO or post office, or
the date payment is posted to the ATO plus three days, or
the date shown on the taxpayer's bank statement where payment is made through direct debit - that is, electronic funds transfer (EFT).

To view or print a table of EPI interest rates for the various periods since 1993/94 to current select Maintenance > Tax Rates > Early Payment Interest.

CCH References

25-440 Interest on Early Payments