Failure to lodge penalty may be applied if the return or statement is not lodged within the required time frame. The penalty is calculated at the rate of one penalty unit for each period of 28 days that the return or statement is overdue, up to a maximum of five penalty units. The current penalty is $210 per unit.
If the return is lodged late and result in tax payable, ATO is entitled to apply General Interest Charge on the amount owning. In many cases, where the lodgement is late for more than three years, the interest can consist more than 50% of the tax debt.
ATO can now issue the taxpayer with default assessment if one or more of the returns are not lodged by the due date. This is an estimated assessment of the taxpayer's taxable income, based on the data available to ATO. The assessment normally results in higher tax payable than the amount prepared by the taxpayer. To rectify the default assessment, the taxpayers need to lodge an objection to ATO decision and provide details work papers to substantiate the claims. This process normally results in a substantial amount of additional time and accounting fee that taxpayer need to spend to manage the return.
Under extreme circumstances, the ATO can prosecute taxpayers for failing to lodge tax returns. The current penalty which can be applied on prosecution is up to $8,500.00 or imprisonment for up to 12 months.
Cash flow Impact
Taxpayers should expect ATO to start chasing the tax payments soon after the return is lodged. Under most circumstance, taxpayers can solve the tax debt by payment arrangement. However, payment plans are limited to 24 months, and the ATO request upfront payment for at least 25% of the total tax debt. And this means the taxpayers need to have a strong cash reserve and cash flow to afford the payment plan. When there is no payment plan in place, taxpayers risk themselves to be prosecuted by ATO for the outstanding tax debt.
In conclusion, if you are behind with lodgement, the cost to manage the returns will be increased, and the ATO can take actions to catch up with you. And this is when you need help from tax specialists like us. we can provide cost effective solution to catch up your late lodgements, and our recovery specialist will help you survive the heavy tax debt. Under certain circumstance, we can even negotiate with ato to reduce your Tax debt amount. If you would like to make a start to stop your tax position from getting worse, please feel free to contact us for an obligation free chat about your unique situation.