Introduction
In recent times, the Australian Taxation Office (ATO) has increased its focus on taxpayers with outstanding tax lodgments and debts. This shift in focus has led to heightened penalties for those who fail to meet their tax obligations. As part of the 2023–24 Federal budget, the ATO received increased funding to scrutinise taxpayers with high-value outstanding debts exceeding $100,000 and aged debts older than two years. This scrutiny primarily targets:
1. Public and multinational groups with an aggregate turnover of over $10 million.
2. Privately owned groups or individuals controlling net wealth exceeding $5 million.
To help you navigate these changes and avoid increased penalties, we’ll explore the recent increases in penalty rates and a valuable small business lodgment penalty amnesty program.
Increased Penalty Rates
Beginning in January 2023, the Commonwealth penalty unit rate witnessed an increase from $222 to $275. This rate was further raised from 1 July 2023 and currently stands at $313 per unit. Consequently, individuals and businesses falling behind on their tax lodgments can anticipate significantly higher financial penalties.
These penalties can be applied to late lodgments of various returns and reports, including but not limited to:
– Activity statements
– Income tax returns
– FBT returns (Fringe Benefits Tax)
– PAYG withholding annual reports
– Single-touch payroll reports
– Annual GST returns and information reports
– Taxable payment annual reports
With the increased penalty rates now in effect, even small businesses may be subject to base penalties for failing to lodge returns, ranging from $313 (1 penalty unit) to $1,565 (5 penalty units). One unit is added for every 28 days the lodgment is overdue.
Small Business Lodgment Penalty Amnesty
In recognition of the challenges faced by small businesses, the ATO has introduced a lodgment penalty amnesty program. This program is in effect until 31 December 2023 and applies to tax obligations that were originally due between 1 December 2019 and 28 February 2022. It has been available since 1 June 2023.
To qualify for this amnesty, a small business must be an entity with an aggregated turnover of less than $10 million at the time the original lodgment was due. This initiative offers a significant opportunity for small businesses to catch up on overdue income tax returns, fringe benefits tax returns, business activity statements, and more without incurring failure-to-lodge penalties.
Next Steps
To ensure you don’t face the revised higher penalty rates for failing to lodge returns and reports, consider the following steps:
1. Plan Ahead: Collate and provide all necessary information well in advance of the lodgment due date, allowing ample time for your tax obligations to be met on time.
2. Communication: If you anticipate delays or have difficulties meeting your obligations, engage with the ATO promptly. They can assist you in requesting an extension for the lodgment due date, applying for remissions, or setting up a payment plan to manage your tax debts.
3. Small Business Amnesty: Small businesses should take advantage of the lodgment penalty amnesty and ensure eligible overdue forms are lodged before 31 December 2023. The ATO will automatically remit any associated failure-to-lodge penalties, providing a valuable opportunity for compliance.
Conclusion
As the ATO increases its scrutiny on taxpayers with outstanding tax obligations, staying informed and proactive is crucial. By adhering to the updated penalty rates, participating in the small business lodgment penalty amnesty, and maintaining open communication with the ATO, you can navigate these changes and avoid unnecessary penalties. If you have any questions or require further assistance, don’t hesitate to reach out to our office. Your financial well-being is our priority, and we are here to support you in meeting your tax obligations effectively and efficiently.
