Here’s How Much the ATO Will Fine You For A Late Tax Return

Tax time is fast approaching and while it’s a bit too early to think about being late on your return, it is worth knowing what happens if you miss the deadline. It’s pretty well established that if you fail to file your tax return in time the ATO can stick you with a penalty. But how much exactly is that fee going to cost you?

What will you be fined if you don’t meet the tax return deadline?

If you fail to lodge your tax return or another kind of payment such as PAYG instalments or GST, then the ATO may stick you with a Failure to lodge (FTL) penalty.

The ATO outlines on its website that it takes individual circumstances into account when deciding what action to take, which means if you have a legitimately good reason for not filing your return you have some leeway.

If you forget to lodge, you’ll be warned by the ATO in writing or via the phone, which will include details of the reason for the penalty, the amount and the due date.

When calculating the FTL fine, the ATO considers the size of the entity and the period of time since the due date. Charges are usually according to the rate of penalty units. As of 1 July 2023, one penalty unit is $313. You can see previous penalty unit rates here.

For small entities, the FTL rate is calculated at the rate of one penalty unit for each period of 28 days that the return is overdue (with a maximum of five units). This means, as a small entity, you could be facing anywhere between $313 and $1,565 for a late tax return. Most individual taxpayers will be in this category.

For medium entities, the same rules apply but the penalty rate is multiplied by two, meaning you’re looking at between $626 and $3,130. A medium entity is when your assessable income or current GST turnover is more than $1 million but less than $20 million.

For a large entity, the penalty unit is multiplied by five, meaning fines begin at $3,130. The ATO considers a large entity to be those with an assessable income or GST turnover of $20 million or more.

Can you avoid the FTL penalty?

The easiest way to avoid the FTL penalty is, quite simply, to lodge your tax return before the deadline. This is October 31 for self-lodgers.

However, as mentioned, the ATO will consider extenuating circumstances if you are late. Here’s what is outlined on the website:

If you receive a penalty notice for failing to lodge a return or statement on time, you can ask for a remission if there are extenuating circumstances. We have discretion to reduce (remit) the penalty according to your individual circumstances. Extenuating circumstances may include situations such as, being impacted by a natural disaster or serious illness. It can also include other circumstances outside of your control which could not be predicted, and you or your agent were not in a position to request further time to lodge.

H&R Block tax expert, Mark Chapman, also outlined to us that “the ATO won’t generally impose a penalty if you are due a refund of tax”.

What are the fines for failing to meet tax obligations?

The FTL tax return deadline fine isn’t the only type of penalty the ATO dishes out. If you’ve failed to meet certain other tax obligations, you can also be issued a charge.

Failing to do the below will incur a penalty, too:

• Keeping or retaining records as required (20 penalty units)
• Retaining or producing declarations as required (20 penalty units)
• Providing access and reasonable facilities to an authorised tax officer (20 penalty units)
• Applying for or cancelling goods and services tax (GST) registration when required (20 penalty units)
• Issuing a tax invoice or adjustment note when required (20 penalty units)
• Both principal and agent must not issue tax invoices or adjustment notes for the same taxable supply or adjustment event (20 penalty units)
• Registering as a PAYG withholder when required (five penalty units)
• Lodging an activity statement electronically when required (five penalty units)
• Paying an amount electronically when required (five penalty units)

If you fail to do any of these it’s safe to say the fines will be hefty.

Don’t forget, the ATO also has a list of things it will be cracking down on in terms of personal tax deductions and claims, so don’t get caught out.

This article has been updated since its original publication date.

Lead Image Credit: ATO/Netflix