How to avoid penalties on late tax returns?
Unless you are below the tax-free threshold or are in a tax-exempt category, lodging a tax return in Australia is compulsory; even if you have a loss or may not have any tax to pay. Because of the busy schedule, people sometimes fall into the trap of filing taxes late.
The implications are strict penalties, fines, and interest. Think you can get away with it?
The Australian Taxation Office (ATO) has a very powerful data-matching system. They will catch up with you, sooner or later.
Want to avoid getting caught by the taxmen? Here are some tips on how to avoid penalties on late lodgement tax returns in Australia.
How late can you file a tax return?
Most taxpayers, including individuals, must lodge their tax returns or inform ATO that their tax return lodgement is not required, by 31st October. Tax agents and tax accountants are granted additional time for lodging tax returns. So if you’re lodging yours through a tax agent, you have until the 15th of May of the following year (depending upon the type of return) to avoid filing taxes late.
What is the penalty for late submission of a tax return?
For most individuals and small businesses, the penalty for late submission of tax returns varies from $180 to $900 per return. If your return is late by 113 days, you will be liable for the maximum penalty of $900. So, if you have five years of tax returns outstanding, you could be penalised by up to $4,500!
Running a company, partnership, trust, or other business entity with a turnover of between 1 and 20 million? Your penalty will vary between $360 and $1,800 per return (depending on how late your payment is). Say you have a turnover of $1.1 million and haven’t lodged any tax returns for five years. Well, you could be penalised a whopping $9,000 by ATO!
What is the late tax return penalty if no tax is due?
Even if no tax is due, a penalty for late lodgement still applies – Yep! This means you could end up paying more in fines and penalties to the ATO than in taxes. And why on earth would you want to do that?
What about interest on late returns?
In addition to penalties for the late filing of returns, the ATO will charge interest on any tax liability from the date the tax was due. And with the ATO’s benchmark interest rate for the Sept-Dec 2018 quarter of 8.96% p.a., the interest is higher than you’d pay on your mortgage.
How do you avoid penalties for filing taxes late?
If you’re filing taxes late at this time, it’s best not to try to sort it out yourself.
While you can lodge your returns online using the MyGov portal, there would be many issues to be considered beforehand. So, don’t do it yourself! Consult a tax accountant who is experienced in late lodgement issues instead.
An accountant experienced in late lodgements will also be able to review your circumstances to determine if there are grounds for penalties and interest to be waived or reduced.
Payment arrangements can also be negotiated with ATO for the tax liability to help your cash flow. So, it is worth seeking professional advice.
At Nav Accountants, we offer the professional tax advice you seek, so book your first consultation today!
BOOK YOUR CONSULTATION NOWBack to blogs
