| Time has a way of slipping away, and missing tax deadlines can happen to anyone. We all know that when you are late to something or miss a deadline, consequences will occur.
The same goes for failing to lodge your taxes on time. So, here’s a breakdown of what you can expect and what you should do when this situation arises.
Receiving an FTL Penalty
When you fail to meet your lodgment obligations on time, you may receive a Failure to Lodge (FTL) penalty. This penalty applies if you have a requirement to lodge or report by a specific deadline but fail to do so.
Consideration of Your Circumstances
ATO understands that sometimes, despite best efforts, there are reasons why taxpayers might miss lodgment deadlines. There are cases where they do not impose penalties for isolated instances of late lodgment.
They take into account your individual circumstances when deciding on any actions.
If they apply FTL penalty, ATO will notify you in writing and include:
- The reason for the penalty
- The amount of the penalty
- The due date for payment (at least 14 days after they give notice).
How ATO calculates a FTL penalty
The calculation of the FTL penalty depends on the size of your entity and how long overdue the lodgment is:
- For small entities, the penalty is one penalty unit for each 28-day period or part thereof that the lodgment is overdue, up to a maximum of 5 penalty units.
- Medium entities (has assessable income or current GST turnover of more than $1 million and less than $20 million) face a penalty rate multiplied by 2.
- Large entities (has assessable income or current GST turnover of $20 million or more) have a penalty rate multiplied by 5.
- Significant global entities are subject to a base penalty amount multiplied by 500.
FTL penalties for significant global entities apply to an entity that fails to lodge an approved form required to be given at a date that is on or after 1 July.
Lodgments to which they apply FTL penalties
An automated penalty system applies FTL penalty to late-lodged returns, reports and statements, including:
- Activity statements
- Tax returns
- FBT returns
- PAYG withholding annual reports
- Single Touch Payroll reports
- Annual GST returns and information reports
- Taxable payment annual reports.
However, the ATO reserves the right to manually impose penalties for late submissions, typically in cases of repeated non-compliance, such as when a taxpayer fails to submit after being requested to do so.
Normally, a penalty will not be applied to late submissions of tax returns, FBT returns, annual GST returns, or activity statements if the submission results in either a refund or no liability, unless:
- A penalty had been imposed prior to the submission (in which case, the penalty will not be waived even if the subsequent submission results in a refund or no liability)
- The outstanding item is a third-party data report, like a report on taxable payments
- The taxpayer is categorised as a large entity
Requesting Penalty Remission
If you receive a penalty notice and believe there are mitigating circumstances, such as being impacted by a natural disaster or serious illness, you can request a remission or waiver of the penalty. The ATO has the discretion to reduce or eliminate the penalty based on your circumstances.
This can also include other unforeseeable circumstances beyond your control, where you or your representative were unable to request an extension to submit on time. You can request a remission either in full or in partial.
You can only request a remission once you have submitted the outstanding returns or statements.
FTL remission requests will be considered by an officer independent of the decision to impose the penalty.
Safe Harbour from FTL penalties
If you engaged a registered tax agent or BAS agent to submit your return or statement, you will not be subject to a late submission penalty if both of the following conditions are met:
- You can demonstrate that you provided the agent with all relevant tax information necessary for them to submit the return or statement by the due date
- The agent’s failure to submit was not due to recklessness or intentional disregard of the law
To qualify for safe harbour, you must provide evidence that you supplied all relevant information to the agent by the due date. If it is determined that the safe harbour provision does not apply, you can still try and ask for a remission of your FTL penalty.
To request a safe harbor exemption, you can:
- Submit a request through ATO’s Online services for business or Online services for agents (registration required)
- Contact them by phone or mail.
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