Avoid Penalties on a Late Tax Return in Australia

1. Avoid Penalties on a Late Tax Return in Australia Lodging a tax return is compulsory in Australia. Whether you are an individual, company, trust, partnership or a sole trader, you must lodge your tax return. A late submission of tax return in Australia will incur stiff penalties and interest from ATO. Who must lodge a tax return? Everyone in Australia must lodge a tax return. Exceptions are if they are in a tax-exempt category or their taxable income is below the tax-free threshold of 18,200 for individuals. A tax return must be lodged even if there is a loss or no tax is payable. Failure to do so can result in strict penalties and fines and interest.

2. How late can you file a tax return? 31st October is the deadline by which most taxpayers, including individuals, must lodge their tax returns or inform ATO that their tax return lodgment is not required. Additional time is granted to tax agents and tax accountants for lodging tax returns. So, if you’re lodging yours through a tax agent, you can get an extra six months to lodge your tax return. A return filed after these dates will be considered as a late tax return by ATO. What penalty for late submission of a tax return? Penalty is worked out by ATO based on the number of penalty unit. One penalty unit is 28 days or part thereof. For most individuals and small businesses, the penalty for late submission of tax return varies from $210 to $900 per return. So, if the return is late by 145 days, the penalty would be $900 i.e. the maximum penalty cap. But for six years of late tax returns u could be penalised by $5,400. For a business with a turnover of between 1 and 20 million, penalty will vary between $360 and $1,800 per return (depending on how late the return is). For example, for a business with a turnover of $1.1 million with five years of outstanding tax returns could be penalised $9,000 just for not lodging these returns on time. This is in addition to any tax that may be payable. Is the penalty levied even is if no tax is due? Short answer is yes. It is a penalty for failure to comply with your obligation to lodge the tax return within the timeframe. It is not related to the tax liability. So even if no tax is due, a penalty for late lodgment still applies. What about interest on late returns? Where tax is paid late, ATO will levy interest based on their benchmark rate. Currently, this rate for Sept-Dec 2018 quarter is 8.96% pa and is much higher than the interest you would pay on your mortgage or other secured loans. Interest is in addition to any penalties for late lodgment. Chances are that if the tax return is late, then any tax payable will also be late unless PAYG tax has been paid.

3. How to avoid penalties for a late tax return? Remission of penalties and interest levied by ATO is messy but possible. It would consider any extenuating circumstances and your personal situation. Payment arrangements can also be negotiated with ATO for the tax liability to help your cashflow. Therefore, it will help to have a strategy to deal with penalties and interest beforehand when tax returns are late. We would recommend consulting a late tax return accountant with experience in applying remission of penalties. He will be able to advice on your personal circumstances and potential grounds for penalties and interest to be waived or reduced.