How to Protect Yourself Against Costly Penalties

What really happens when you miss a tax deadline?

What may seem minor at first soon shows itself to be one pricey problem with late lodgement penalties from the Australian Tax Office (ATO).

The ATO’s Failure to Lodge (FTL) penalty is designed to promote timely compliance to payment deadlines. The longer you leave payments, the heavier the penalty becomes.

What is the 15 May Tax Lodgement Deadline?

This is the extended tax return deadline for eligible taxpayers using an ATO-registered tax agent to lodge their return, such as through your Aintree Group advisor. It allows some individuals, trusts, and partnerships extra time to lodge their income tax returns beyond the standard 31 October deadline.

If the 15 May deadline applies to you, it’s important that your Aintree Group advisor is provided all necessary documentation with enough time to spare, so that we may prepare your lodgement in time.

Sending your information through a couple of days before is not enough time for us to review, prepare and lodge your return. If we don’t receive the information we need from you in a timely manner, we can’t guarantee your lodgement will be submitted before the deadline, and harsh Failure to Lodge Penalties may apply.

What is a Failure to Lodge (FTL) Penalty?

An FTL penalty applies when you fail to lodge or report, such as a tax return or activity statement, by a particular date. It applies to individuals, companies, trusts, partnerships and superannuation funds.

How is it calculated?

The penalty amount is calculated based on entity size and how long the lodgement is overdue.

Read here for further information on what lodgements the penalty applies to.

The Base Penalty Amount (BPA) is calculated as one penalty unit for every 28 days late (or part thereof), eventually capped at five units.

The BPA applies to individuals and small withholders and is multiplied accordingly for medium and large withholders.

What is a small withholder?

Small withholders are those who withhold $25,000 or less per financial year.

They:

• pay withholding amounts to the ATO each quarter.
• report withholding on activity statements received each quarter.
• can arrange to receive monthly activity statements by phoning the ATO’s business services.

What is a medium withholder?

Medium withholders withhold $25,001 to $1 million per financial year.

They:

• pay withholding amounts to the ATO each month.
• report withholding on activity statements received each month.

What is a large withholder?

Large withholders are either:

• an entity that withheld amounts totalling more than $1 million in a previous financial year.
• part of a company group that has withheld more than $1 million in a previous financial year.

They:

• are issued a Payment Reference Number (PRN) to use when making payments to the ATO.
• pay withholding amounts electronically within 6 – 8 days from the day the amount is withheld, such as when paying staff, using their PRN / Electronic Funds Transfer (EFT) code 70.
• don’t report PAYG withholding on activity statements.

It is important to note which entity size you fall under, as this will affect your lodgement due date.

The 15 May lodgement due date applies to most individuals, partnerships and trusts lodging through a registered tax agent, such as Aintree Group. Exceptions can bring this date forward depending on the client’s circumstances, such as having a prior year tax liability of $20,000 or more, being a large or medium trust, or having outstanding prior year returns. A 5 June concession also applies automatically to those with a 15 May due date, with no deferral application required, provided any payment owing is also made by that date.

If you’re not sure whether you’re a small, medium, or large withholder, please get in touch.

The table below outlines how amounts differ for each tier:

Tier/Entity Type	Penalty Rate (per 28 days late)	Maximum Penalty Units	Maximum Penalty ($ approx.)
Individuals & Small Entities	One penalty unit	Five units	$1,650
Medium Entities	Two penalty units	Ten units	$3,300
Large Entities	Five penalty units	25 units	$8,250
Significant Global Entities	500 penalty units	2500 units	$825,000

What does that mean for you?

Basically, the larger the entity, the heavier the late lodgement penalty. With cost expanding for each successive period (or part-period), the importance of timely lodgements cannot be overstated.

To ensure your lodgement is submitted on time, it is essential we have all necessary documents well in advance.

What Exceptions Apply to Late Lodgement Penalties?

So, you’ve been penalised. What are your options?

When you receive a penalty notice, you may request a remission of the penalty. Assessed by the ATO on a case-by-case basis, part or all of the penalty may be remitted.

With a remission request, you’ll need to provide context, such as the reason for delay, supporting evidence, and relevant dates. In essence, your circumstances are combined with your compliance history and available records to reach a decision.

Explore these different considerations, below:

Compliance History

By and large, taxpayers with a good compliance history are treated preferentially. Your compliance history is based on your historical timeliness in lodging, whether you have paid or participate in a payment plan for all non-disputed debt, or whether you have another penalty imposed.

Personal Circumstances

Personal circumstances are considered, such as whether you were willing but unable to comply due to factors beyond your control or due to you experiencing vulnerability.

Safe Harbour from FTL Penalty

Safe harbour from FTL penalties means you may avoid late lodgement penalties if you relied on a registered tax agent, provided all required information on time, and the delay occurred due to the agent, not you.

Best case scenario? Prepare. Make sure all necessary documents have been provided to us in advance, so that deadlines can be met.

Late Lodgement Penalty in Action

Deadlines aren’t suggestions. Once they pass, late lodgement penalties step in, leaving little room for excuses. Read the following cases below to see the penalties in action.

A Fictional Case Study

Chartered Accountants Australia & New Zealand (CAANZ) provides us with a worked example of the penalty in action. Let’s call the taxpayer subject ‘A.’ A’s return was lodged 100 days late, representing three full periods and one part period. Thus, the BPA is calculated as $330.00 x 4 = $1,320.00. However, A is a medium entity – so this figure is multiplied by two. In result, the penalty amount equals $2,640.

Additional Costs: Late Payment Penalty

On top of this, the late lodgement incurs interest and thus results in a tax liability known as a late payment penalty. This is different to a late lodgement penalty. Late payment penalties are covered under the General Interest Charge (GIC) regime, which from April to June is taxed at the GIC annual rate of 10.96%. This interest is not tax detuctable, so it’s important to get it right and avoid these extra costs.

Superannuation Considerations

There is also the Superannuation Guarantee Charge, a penalty employers must pay to the ATO if they don’t pay their employees’ super contributions correctly. This includes the unpaid super amount, the interest upon the super amount (fixed at 10% annually, a different rate to that of the GIC), and an administration fee.

Key Takeaway

Here, we see how costs can easily stack up. It is imperative to be proactive, pre-empting issues to avoid costly consequences.

Lodge Late = Pay More

Don’t let it snowball.

The consequences are not just about money. Late lodgement can lead to interest charges, compliance flags, and even inhibit your ability to access certain concessions or refunds. Consistent late lodgement may also attract stricter enforcements.

Early action reduces risk. By submitting your documents to your Aintree Group advisor on time, you are helping to protect yourself against consequences beyond just the financial.

Lodge Late, Pay More: How to Protect Yourself Against Costly ATO Penalties

What is the 15 May Tax Lodgement Deadline?