ATO changes to interest and penalty remissions a step forward, but fair outcomes must follow

Australia’s largest accounting body, CPA Australia, says changes announced by the Australian Taxation Office (ATO) to how taxpayers and tax agents request interest and penalty remissions are a positive step toward greater transparency, but their success will ultimately depend on whether decisions become more consistent and empathetic in practice.

The ATO has introduced new standardised application forms and centralised processing for requests to remit the General Interest Charge (GIC), Shortfall Interest Charge (SIC) and Failure to Lodge (FTL) penalties. The changes come amid ongoing concern regarding inconsistent outcomes, limited explanations for decisions and confusion for taxpayers navigating the remission process.

CPA Australia’s Tax Lead, Jenny Wong, said the reforms appear to be a direct response to long standing issues raised by the Inspector General of Taxation and Taxation Ombudsman.

“The ATO’s move to standardise and centralise interest and penalty remission requests is a welcome step toward greater consistency and transparency, particularly given concerns raised by the Tax Ombudsman and the tax professional community,” Ms Wong said.

The Tax Ombudsman recently commenced a review into the ATO’s administration of GIC remission after a surge in taxpayer complaints, citing a perceived tightening of ATO policy, limited transparency around decision making and inconsistent outcomes across different ATO channels.

Ms Wong said these concerns have taken on extra urgency with the General Interest Charge becoming non tax deductible from 1 July 2025.

“With the General Interest Charge now non deductible, the financial impact of ATO decisions is much more significant for small businesses and individuals,” she said.

“That makes it critical that remission decisions are fair, predictable and clearly explained, especially where taxpayers have made genuine efforts to comply.”

Under the changes, taxpayers and their agents must use specific ATO forms when requesting remission, with applications directed to dedicated ATO teams. According to the ATO, the centralised approach is intended to ensure law and policy are applied uniformly, regardless of which officer or channel receives the request.

The ATO has also released new guidance pages, including practical examples of when remission is likely to be granted or declined.

“Clearer guidance and real world examples should help taxpayers understand how the ATO is making its decisions,” Ms Wong said. “For too long, taxpayers have been left guessing why similar circumstances can produce very different outcomes.”

Ms Wong said the creation of dedicated processing teams and clearer guidance had the potential to reduce frustration among both taxpayers and tax and BAS agents.

“Tax professionals want to help their clients do the right thing, but inconsistent outcomes have made that increasingly difficult,” she said. “Dedicated teams applying the same criteria should go some way toward restoring confidence in the system.”

However, CPA Australia cautions that the reforms must translate into meaningful improvements, rather than simply adding further administrative steps.

“The new forms and examples are a positive development, but the real test will be whether taxpayers experience more consistent and empathetic decision making,” Ms Wong said. “There is a risk that standardisation becomes a box ticking exercise unless it is matched with genuine discretion and common sense.”

CPA Australia notes the ATO has described the changes as interim while it conducts a broader review of taxpayer relief provisions, alongside the Tax Ombudsman’s inquiry, which is due to report in early 2026.

“We support efforts to improve transparency and consistency, but ongoing monitoring will be critical,” Ms Wong said. “These changes must result in fairer outcomes for taxpayers – not just more paperwork or more rigid processes.”

CPA Australia will continue to engage with the ATO and monitor the impact of the reforms on taxpayers and the profession.

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