The Australian Tax Office (ATO) are automatically identifying, calculating, and paying Interest on Early Payments (IEP) from March 2022. The process applies to eligible early payments made from 1 July 2021.

Eligible payments

You may receive IEP when you make payments towards any of the following liabilities more than 14 days before the due date:

• 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).

For eligible payments made:

• after 13 March 2022, the ATO are paying IEP entitlements generally within two weeks of the due date of the liability
• between 1 July 2021 and 13 March 2022, the ATO are paying IEP entitlements from 14 March 2022.

The payments will be made into the nominated account for your regular ATO refunds. You should ensure your financial institution details are up to date.

If you have an existing tax debt, your IEP entitlement will be offset against the debt and any excess IEP amount will be paid.

Payments not eligible

The following payments are not eligible for IEP:

• 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 for HELP, VETSL SFSS, TSL, SSL or ABSTUDY SSL)
  • PAYG instalments
  • any part of a payment that exceeds the amount that is due and payable.

Interest on early payments is assessable income and needs to be included in your tax return in either the:

• income year you receive the interest
• income year it is offset against your tax debt.

What is the interest rate?

For the 2023/24 financial year the interest rates used for calculation of early payments is:

Period	Interest rate (% pa)
1 July 2023 to 30 September 2023	3.90
1 October 2023 to 31 December 2023	4.15
1 January 2024 to 31 March 2024	4.38
1 April 2024 to 30 June 2024	4.34

How the ATO treat’s IEP

Interest on early payments is assessable income.

For individuals, IEP amounts will be prefilled in your income tax return and shown in the Income Tax Prefill Reports.

Include any IEP in your tax return in either the income year you receive the interest payment, or the income year it is offset against another tax debt you had with the ATO.

If you would like any help navigating interest on early payments, please contact us.