ACT Rates Deferral Interest Rate Explained

The Rate: Concessional, Not Penalty

Deferred rates in the ACT don't attract the same penalty interest charged on overdue tax. Instead, the ACT Revenue Office applies a concessional rate specifically designed for pensioners and older homeowners.

The rate is pegged to the Reserve Bank of Australia's monthly average 90-day Bank Accepted Bill rate. It's updated twice a year — on 1 July and 1 January — so it moves with broader interest rate conditions rather than being set arbitrarily.

This is materially lower than the standard default interest rate applied to overdue rates under the Taxation Administration Act 1999.

Simple Interest, Not Compound

The single most important detail: deferred rates accrue simple interest. Interest is calculated daily on the outstanding principal only. It does not compound — you're never paying interest on interest.

The daily calculation works as:

Daily interest = Principal × (Annual rate ÷ 365)

Over a full year at an illustrative 4% rate on a $2,000 deferred balance, that produces $80 in interest. The interest is added to the running debt total but doesn't itself generate further interest charges.

What the Numbers Look Like Over Time

Using a steady 4% rate and $2,000 deferred each year (the actual rate fluctuates with RBA adjustments):

After ten years, roughly $4,400 of the $24,400 total is interest. The principal ($20,000) is rates you would have paid anyway — deferral simply moved the timing.

These are illustrative figures. The actual rate adjusts every six months, so periods of higher RBA rates increase the interest cost and vice versa.

How It Differs from a Reverse Mortgage

Rates deferral covers rates charges only; it does not provide a lump-sum advance. The deferred balance accrues simple interest on principal and is secured as a statutory charge on the land, without a separate commercial mortgage document being lodged.

When Interest Becomes Payable

The accumulated debt (principal plus interest) becomes due in three situations:

1. You sell the property — the debt is cleared from the sale proceeds at settlement
2. You transfer the title — any change of registered ownership triggers payment
3. You pass away — the estate settles the debt before distributing assets

As long as you continue living in the home as your principal residence, the debt sits on title and doesn't require any periodic payments.

For a personalised projection based on your actual rates bill and current RBA benchmarks, the ACT Rates Rebate and Deferral Guide includes a deferral interest worksheet.

See more Australian Capital Territory guides →