Instalment interest and possible penalty charges will be applied if you do not pay your required tax
instalments or paid insufficient amounts.
Instalment interest
You will be charged instalment interest if all the following apply:
- You are required to pay by instalments in 2022
- You receive an instalment reminder in 2022 that shows an amount to pay
- You did not make any of your instalment payments, paid late, or paid less than what you had to
pay
We charge instalment interest on all late or insufficient instalment payments. Instalment interest is compounded daily at the prescribed interest rate, which can change every three months.
How we calculate your interest
Interest on each instalment payment you should have paid
We calculate interest from the day it was due to your balance due date, based on the payment
calculation option that results in the least amount of interest.
– Interest on each instalment you paid
We calculate the interest for the year starting from the date the payment was made or January 1
(whichever date is later) up to the balance due date.
= Your charge (if more than $25)
The interest you owe is the difference between A and B.
Instalment penalty
You may have to pay a penalty if your instalment payments are late or less than the required amount.
We apply this penalty only if your instalment interest charges for 2022 are more than $1,000.
To calculate the penalty, we determine which of the following amounts is higher
If a flat rate of $1,000 is higher
You are charged: $1,000
OR
If 25% ofthe interest is higher
You are charged: 25% of the instalment
interest you would have paid if you had not
made instalment payments for 2022
We subtract the higher amount from your actual instalment interest charges for 2022. We then divide
the difference by 2 and the result is your penalty
Reduce your instalment interest and penalty charges
You can reduce or eliminate interest and penalties if you do one of the following:
overpay your next instalment payment
pay your next instalment early
This will allow you to earn instalment credit interest. This credit interest is not refundable and can
only be used against any interest charges on late payments for the same tax year.
The original article can be found here
*The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions, a further review should be done by a qualified professional.
No individual or organization involved in either the preparation or distribution of this text accepts any contractual, tortious, or any other form of liability for its contents.
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