Can a future debt accure interest retrospectively?
October 12, 2008 4:58 PM   Subscribe

I did my Australian taxes late. I'm now being charged a general interest charge on a $7.5k Higher Education Debt that didn't exist at the time. Is there anything I can do?

So my life fell apart for a few years (living arrangements, relationships, work, health - everything was a disaster). As a result I wasn't able to get it together enough to do my taxes (from 2003/2004 till April this year). At the time I quit my job and went back to study.
Fast forward to now, I'm back on top of things so went back and submitted the 4 outstanding returns. Yay for me! I thought.
My HELP (Higher Education Loan Programme) debt in 2004 was about $200. In 2005 it was about $1.8k. Today it's $7.5k. But when the ATO went through my tax return for the 2005 year, they applied the current HELP debt of $7.5k to that year, and slapped on a hefty general interest charge (around $3.8K). So all up my current liability to the tax office is $12 000, even though I've been a low income earner and student for all but one of these outstanding years.
It seems outrageous and unfair that a debt that accrued in the future, can be applied to the past, and that interest can then accrue on that debt.
I've been to 2 accountants already. The first said "sure it's a bit mean, but the ato calculations are correct (HELP is not matched by year) and it will probably cost you more to have us fight this than to just pay it".
The second said "you might be able to get out of the general interest charge, but only if you can prove you didn't submit your returns as a result of a natural disaster, medical reasons (supported by GP) or inability to access records".
Over those years I moved house a couple of times, went to various doctors many times, and saw a few counselors. But to chase up certificates/proof for all those little pieces of evidence seems unbearable. And I'm not sure that it will even stack up as a reasonable excuse.
Please help me hive mind - do I have any other options?
posted by bingoes to Work & Money (3 answers total) 2 users marked this as a favorite
Here is what the tax department does, and this is what you should if you believe they made a mistake. If I were you, I'd list out what you think your debt was per year in one column, and the interest you believe should have accrued in a second column, with the penalty fee in the third column. Sum rows and columns and compare with their findings. Include all the details they require:
* your name, address, phone number and tax file number
* the year shown on the tax return you want to amend – for example, 2008
* the tax return item number and description affected by the change
* the amount of income or deductions to be added or taken away, if relevant
* the amount of tax offsets to be increased or decreased, if relevant
* the claim type code – if one applies to the item you are changing
* an explanation of why you made the mistake or the reason for the change
* a declaration as follows: ‘I declare that all the information I have given in this letter, including any attachments, is true and correct’
* the date, and
* your signature.

And then go buy a scratch-it ticket, because you're just as likely to win with one of those.
posted by b33j at 5:53 PM on October 12, 2008

The ato website says that they will charge GIC 'from the original due date', which does imply that when it was accrued should matter. On the same page, it says you can request a remission of all/part of the interest charged. But the best way to find out what your options are would be contacting them (anonymously, if you like) by phone.
posted by jacalata at 12:52 AM on October 13, 2008

I had a sort of similar experience when I lodged my tax return from casual work while I was still at uni one year and the ATO took a great whack out of the return to pay for my HELP debt.

I appealed, pleading that I hadn't graduated, for chrissake, and that to pay for next year's fees and living expenses I really, really needed the money from my tax return. I did some tearful grovelling (this wasn't hard, I was *hysterical* it was a couple of thousand dollars) and some letter writing. They were actually pretty nice and refunded the money. So... I reckon it's definitely worth getting in touch with them. Good luck.
posted by t0astie at 1:20 AM on October 13, 2008

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