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ATO Interpretative Decision

ATO ID 2002/757 (Withdrawn)

Income Tax
Deductibility of General Interest Charge imposed on Running Balance Account debt - when incurred or when paid

Attention This ATO ID is withdrawn. The ATO ID contains a view which is explained in Tax Determination TD 2012/2. Additional Guidance on the deductibility of ATO interest is contained in Interest charged by the ATO (QC 31992).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 28 July 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Can a taxpayer claim a deduction under paragraph 25-5(1)(c) of the Income Tax Assessment Act 1997 (ITAA 1997) for an amount of General Interest Charge (GIC) that is payable on a Running Balance Account (RBA) deficit debt in the income year that the GIC is payable, even though the amount is not paid until a later year of income?


Yes. The taxpayer can claim a deduction under paragraph 25-5(1)(c) of the ITAA 1997 for GIC payable on an RBA deficit debt in the income year in which the GIC is payable notwithstanding that the GIC was paid in a later year of income.


The taxpayer's notice of assessment was issued on the 2 March 2001.

The taxpayer's assessment was a debit assessment with tax due and payable on 2 April 2001.

On 2 April 2001, the tax due and payable remained unpaid and consequently the taxpayer has an RBA deficit debt.

On 30 June 2001, the Commissioner issued a statement of account which included an amount of GIC payable on the RBA deficit debt.

Although the taxpayer did not pay the amount on the statement of account until 19 July 2001, they sought to claim a deduction for the amount in the 2001 income year.

Reasons for Decision

Part IIB of the Taxation Administration Act 1953 (TAA 1953) provides for the:

 establishment of a system of accounts, also known as RBA, for the allocation of primary tax debts, payments made by a taxpayer and credit entitlements available to a taxpayer
 preparation of an RBA deficit debt or RBA surplus
 levying of a daily GIC on an RBA deficit debt which is the amount outstanding after the posting of primary tax debts, payments and credits; and
 preparation of an RBA statement which is also known as a statement of account for issue to a taxpayer.

Specifically, subsection 8AAZF(1) of the TAA 1953 provides that if there is an RBA deficit debt at the end of a day, then GIC is payable on that RBA deficit debt for that day.

Part IIA of the TAA 1953 explains how to work out a GIC on an amount.

Section 8AAE of the TAA 1953 provides that GIC for a day is due and payable at the end of that day.

Paragraph 25-5(1)(c) of the ITAA 1997 provides that a taxpayer can deduct expenditure incurred to the extent that it is for the GIC worked out under Part IIA of the TAA 1953.

To be deductible in a particular year, the expenditure must have been incurred in that year.

The courts have considered the meaning of the word 'incurred'. In New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation (1938) 61 CLR 179; [1938] HCA 60; (1938) 1 AITR 366; (1938) 5 ATD 36, the High Court stated:

   'Incurred' does not only mean defrayed, discharged, or borne, but rather it includes encountered, run into, or fallen upon ......... But it does not include a loss or expenditure which is no more than impending, threatened, or expected.

In W Nevill & Co Ltd v. Federal Commissioner of Taxation (1937) 56 CLR 290; [1937] HCA 9; (1937) 1 AITR 67; (1937) 4 ATD 187, the High Court established that a liability does not have to be paid to be incurred and stated:

   The word used is 'incurred' and not 'made' or 'paid'. The language lends colour to the suggestion that, if a liability to pay money as an outgoing comes into existence, [the section is satisfied] even though the liability has not been actually discharged at the relevant time. .... It is only the incurring of the outgoing that must be actual; the section does not say in terms that there must be an actual outgoing - a payment out.

As the GIC is due and payable on a day-to-day basis, it is incurred on that basis. Accordingly, the taxpayer is entitled to a deduction under paragraph 25-5(1)(c) of the ITAA 1997 for the amount of the GIC payable on their RBA deficit debt in the 2001 income year as it has been incurred, even though they did not pay the GIC until the 2002 income year.

Amendment History

Date of Amendment Part Comment
12 September 2014 Issue Minor amendments to clarify content
  Decision Minor amendments to clarify content
  Facts Minor amendments to clarify content
  Reasons for Decision Minor amendments to clarify content
  Legislative References Inserted reference to subsection 8AAZF(1) of TAA 1953
  Case References Inserted medium neutral citation
  Keywords Insert 'incurred' as a keyword

Date of decision: 6 March 2002

Year of income:30 June 2001

Legislative references:
Income Tax Assessment Act 1997
   paragraph 25-5(1)(c)

Taxation Administration Act 1953
   Part IIA
   section 8AAE
   Part IIB
   subsection 8AAZF(1)

Case references:
New Zealand Flax Investments Ltd v. Federal Commissioner of Taxation
   (1938) 61 CLR 179
   [1938] HCA 60
   (1938) 1 AITR 366
   (1938) 5 ATD 36

W Nevill & Co Ltd v. Federal Commissioner of Taxation
   (1937) 56 CLR 290
   [1937] HCA 9
   (1937) 1 AITR 67
   (1937) 4 ATD 187

Deductions & expenses
General interest charge

Siebel/TDMS reference number: DW399899;1-5LRR6X9, 1-BKP7QKO

Business line: Small Business/Individual Taxpayers

Date of publication: 31 July 2002

ISSN: 1445-2782

ATO ID 2002/757 (Withdrawn) history   Top  
   Date   Version 
    6 March 2002   Original statement   
   12 September 2014   Updated statement   
 You are here ®  28 July 2017   Withdrawn   


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