Interest: Credit and debit rates
Current and past interest rates
Two-way interest rules apply to all taxes and duties. If you overpay tax, we will generally pay you interest from the day after the original due date for the relevant return period (within certain rules). If you underpay, you will be charged interest from the day after the original due date for payment. This is the same as interest charged by banks on loans.
These rules are designed to:
- encourage you to pay the right amount of tax at the right time
- compensate you if you pay too much tax by paying you interest
- compensate the government if you pay too little tax by charging you interest.
Interest rates
The interest rates are set by government and are based on market rates, so they will vary over time.
| Period | Debit rate | Credit rate |
|---|---|---|
| From 8 March 2007 |
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| From 8 March 2005 |
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| From 8 November 2001 |
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| From 8 November 2000 |
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| From 8 March 2000 |
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| From 8 March 1999 |
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| From 8 November 1998 |
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| From 7 July 1998 |
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| From 7 February 1997 |
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Interest on underpayments is linked to the market rate for short-term borrowing. Interest on overpayments is linked to the market rate for short-term deposits.
How interest is calculated
Interest is calculated on a daily basis on the amount of overpaid or underpaid tax.
Interest does not compound and is not included when calculating penalties.
Interest on tax underpayments is charged on the tax owing, which includes accumulated penalties and shortfall penalties.
Interest applies to these taxes and duties
- Casino duty
- Cheque duty
- Child support deductions by employers
- Foreign dividend withholding payments
- Fringe benefit tax (FBT)
- Gaming machine duty
- Gift duty
- Goods and services tax (GST)
- Imputation accounts
- Income tax
- Lottery duty
- Non-resident withholding tax (on interest and dividends)
- PAYE deductions
- Qualifying company election tax
- Resident withholding tax (on interest and specified dividends)
- Student loan deductions by employers
- ESCT (employer superannuation contribution tax), formerly specified superannuation contribution withholding tax (SSCWT)
- Totalisator duty
- Working for Families Tax Credits.
These interest rules do not apply to:
- student loan repayments, or
- child support payments.
The starting date for interest
Underpayments of tax
Interest starts on the day after the original due date for the relevant return period. It ends on the day the tax is fully paid.
Overpayments of tax
Interest starts on the day after the original due date for payment of the tax, or the day after payment is made, whichever is later. In some cases you need to file a tax return before a refund can be made.
If this is the case, interest starts on the latest of:
- the original due date
- the day after the payment that generates the refund is made,
ie when the credit becomes available - the date the return is filed.
In most cases, interest stops on the day the overpaid tax is refunded or applied towards paying other tax.
Date published: 30 Jun 2008
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