Any instalment interest and penalty charges that apply will be shown on your 2007 Notice of Assessment or Notice of Reassessment.
Instalment interest
We charge instalment interest if all of the following conditions apply:
- we send you an instalment reminder in 2007 that shows the amount to pay;
- you are required to make instalment payments in 2007; and
- you choose not to make instalment payments, or you make payments that are late or less than the required amount.
We calculate the interest on each instalment that you should have paid using the payment option that calculates the least amount of interest. Then we calculate the interest on each instalment you did pay. We charge the difference between these two amounts if the difference is more than $25.
Instalment interest is compounded daily at the prescribed interest rate. This rate can change every three months. To get the current interest rate, see prescribed interest rates.
If you realize during 2007 that you paid less than your required instalment payment, or that you did not pay it on time, you can reduce or eliminate an instalment interest charge by overpaying your next 2007 instalment payment or by paying it early.
Instalment penalty
You may also 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 2007 are more than $1,000.
To calculate the penalty, we determine which of the following amounts is higher:
- $1,000; or
- one-quarter of the instalment interest that you would have had to pay if you had not made instalment payments for 2007.
Then, we subtract the higher amount from your actual instalment interest charges for 2007. Finally, we divide the difference by two and the result is your penalty.
Example
For 2007, John made instalment payments that were less than he should have paid. As a result, he has $2,500 of actual instalment interest charges for 2007. If John had not made any instalment payments in 2007, his instalment interest charges would have been $3,200. Since one quarter of $3,200 is $800, we subtract $1,000 (the higher amount) from $2,500. The difference is $1,500. Then, we divide $1,500 by two. John's penalty is $750.
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