ATO Penalties For Failure To Lodge In Time

ATO Penalties For Failure To Lodge In Time

ATO PENALTIES FOR FAILURE TO LODGE IN TIME

What is Failure To Lodge? What and who does it apply to?

What is Failure To Lodge (FTL) penalties?

If you fail to lodge the documents on time as stipulated by the Australian Taxation Office (ATO), they will likely apply a fine for the documents they require from you. This is called the Failure To Lodge (FTL) penalty.

What documents are included?

Automated and manual FTL penalties can apply to returns, reports and statements that are lodged late including:

  • business activity statements (BAS)
  • tax returns
  • Fringe Benefits Tax (FBT) returns
  • Pay As You Go (PAYG) withholding annual reports
  • Single Touch Payroll (STP) reports
  • annual GST returns and information reports
  • taxable payment annual reports.

What businesses are included and how are the penalties applied?

No matter the size of your business, FTL will likely apply. The ATO defines businesses in one of four categories; Small, Medium, Large and Significant and applies the penalties according to the size of your business entity.

Business entity’s sizes and fines

For small business entities, a fine is usually applied at the rate of one unit (approx. $222 at time of writing) per 28 days or part thereof late. Other circumstances mentioned above may increase this to as many as 5 units per 28 days or part thereof late.
A small business entity is defined by the ATO as a business entity that has an assessable income or current GST turnover of less than $1 million.

For medium business entities, a fine is usually applied at the rate of two units (approx. $222 per unit at time of writing) per 28 days or part thereof late. Other circumstances mentioned above may cause this to be multiplied accordingly.
A medium business entity is defined by the ATO as a business entity that is a medium withholder for PAYG withholding purposes or has assessable income or current GST turnover of more than $1 million and less than $20 million.

For large business entities, a fine is usually applied at the rate of five units (approx. $222 per unit at time of writing) per 28 days or part thereof late. Other circumstances mentioned above may cause this to be multiplied accordingly.
A medium business entity is defined by the ATO as a business entity that is a medium withholder for PAYG withholding purposes or has assessable income or current GST turnover of more than $1 million and less than $20 million.

Taking circumstances into account

Contrary to popular belief, the ATO does not aggressively apply fines at every given opportunity. While it’s true some fines are applied regardless of the situation, in many cases, including FTL, the ATO will often take your circumstances into account. This is because they recognise that you may have had the best of intentions to lodge on time but circumstances may have prevented you from doing so. Therefore, the amount of the fine applied may take into account such things as repeat offenders, how late the document is, natural disasters, and serious illnesses among others.
In the case of FTL, it’s unlikely the ATO will fine you if you have one, isolated case of FTL as long as it’s rectified quickly after the due date or the ATO gives you a reminder/warning.

Applying penalties

If you fail to lodge on time, the ATO will contact you by phone or in writing to give you a warning.
If the ATO go ahead and apply an FTL penalty, they’ll notify you in writing and include:

  • the reason for the penalty
  • the amount of the penalty
  • the due date for payment (at least 14┬ádays after we give notice).

Remissions & Safe Harbour

In some cases, you may be eligible for a reduction (partial remission) or cancellation (full remission) of an FTL penalty. If you engaged the services of a Tax or BAS Agent to handle the documents in question then may be eligible for a cancellation of the FTL under the ‘Safe Harbour’ rule.

Remission

Remission is the reversal of a penalty or fine whether in full or in part. If you feel you have grounds for remission, you can request one and the ATO will consider your circumstances further and possibly apply a lesser fine for example, or even a full cancellation.

Safe harbour

Safe harbour is an advantage of using a qualified tax agent or BAS agent/bookkeeper. In a nutshell, you would need to be able to prove you have provided all the necessary documents etc to the tax agent, or BAS agent/bookkeeper in a timely manner ahead of the due date. Furthermore, the tax agent or BAS agent/bookkeeper or you were in no way or manner disregarding the tax laws causing the late lodgement.

Summary

In the end, it’s obviously best to meet your ATO obligations on time to avoid any unnecessary extra administration, stress or fines. Having a good BAS agent and/or bookkeeper should be a huge advantage for your business in this way. At Positive Traction Bookkeeping, our qualified BAS agents and bookkeepers keep track of your various financial and tax obligations with our accounting software. This allows us to forewarn you of upcoming bills and other commitments that may cost you money (such as lodging ATO required documents on time) and make sure all are paid and/or lodged on time for you. Taking the stress of going on stop-credit with suppliers or copping fines from the likes of the ATO is all part of engaging a bookkeeping business that doesn’t just push a few numbers around and let you suffer the consequences. Your success is our success.

 

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