Do you have late and overdue tax returns? Are you feeling stressed and worried over tax matters?
(Updated: 17 June, 2023)
We understand. At Platinum Accounting & Taxation we’ve helped many taxpayers bring their late, overdue tax returns and general tax affairs up-to-date.
You’re in the right place and we’re ready to help you.
We know how late tax returns and overdue tax return lodgments can make you feel - stressed, anxious, debilitated. But a lot of the stress you’re feeling is based on how you think the ATO might work, rather than how the ATO actually works.
When we explain to our clients how the ATO actually handles late tax returns, we find it gives our clients instant comfort. We've been helping clients across Melbourne with overdue tax returns for more than 10 years.
Clients with overdue tax returns often leave our office feeling better and saying “That’s a huge weight off my shoulders”, even though there may be a lot work still ahead of us.
The relief comes from having some certainty around what the situation actually is, rather than worrying over what could happen. So we encourage you to begin the process with us, rather than delaying it any further.
We love helping clients do away with the stress of tax and get a better night’s sleep. Helping our clients achieve peace of mind is one of the most rewarding aspects of our work. So read on, because we’re certain our answers to your questions will help dissipate some of the tax stress you’re feeling right now.
1. Will the ATO jail me for having late tax returns?
No. Late lodgement of tax returns is completely different from tax evasion, or tax fraud, or any of the other crimes the ATO pursue people for. You’re not going to get a knock on the door from the police about overdue tax returns.
The ATO has an escalating scale of action which goes something like this:
- Reminder letter
- Failure to lodge penalty (in certain cases)
- Demand for lodgments
- Default assessment warnings
- Statement of account (detailing your tax bill)
- Payment reminder
- Refer to a debt collector
- Legal action
We’ll be honest in saying that the ATO does have different approaches for different situations, however, if you’re individual or a small business then you’re likely nowhere near the legal action stage.In the rare event that your case does reach the legal action stage, it’s still not a police or jail matter anyway.
2. I’m due a tax refund. Will the ATO still fine me for an overdue tax return?
It’s fair to say that most employees get a tax refund because employers are supposed to deduct enough tax from your annual salary.In our experience as tax accountants, if you lodge a late tax return and receive a refund, the ATO generally won’t fine you.
A word of warning: if you are fined for not lodging a tax return, and then you later receive a refund, that doesn’t mean your fine will be automatically reversed. You'll need to request a penalty remission.
3. Will I be fined and charged interest for late lodgement?
Fines? Possibly. Interest? Certainly (if you have a tax liability).
The ATO might have a tough reputation, but on the whole, they’re quite fair and reasonable. They do offer official channels through which a taxpayer (or their tax agent) can request remission of any fines and interest.
With a polite request and a solemn promise to be a timely tax lodger from this day on, they’ll often give favourable consideration to the reversal of penalties and interest. They take into consideration your personal situation, such as physical or mental illness, family breakdown, being a victim of crime, natural disasters or other factors beyond your control.
When you're able to evidence reasons such as these the ATO are likely to be more willing to assist with the remission of penalties and interest. It's worth noting that the ATO's interest rate tends to be anywhere between 10% - 11%. But do check the ATO website for the current, applicable general interest charge (GIC) rates.
The standard late lodgment penalty is, at the time of writing, $275 per “penalty unit” for small taxpayers, and the maximum fine is $1,375 (5 months at $275 per month).
4. Does the ATO allow payment arrangements?
Naturally, the ATO expects that all tax liabilities are paid on time and in full. However, if full payment is not possible, they do accept payment arrangement by negotiation.
Payment arrangements are generally acceptable where the debt will be paid off within 12 months. Beyond that, there is some limited scope for a longer payment plan of up to 24 months, but you may need to demonstrate financial hardship or other complex circumstances.
But there is one condition: You must stay up to date on all future BAS and tax lodgments. For example, if you commence a payment plan to reduce the existing tax debt, but miss a future BAS or tax payment, your payment arrangement will default. This means you may need to re-negotiate your payment arrangement.
You must be mindful of the need to manage past and future tax payments obligations simultaneously. If you can pay in full, you should always opt to do so. Not only is it preferred by the ATO, but you don’t want to be burdened with a debt at incurring interest at a rate of 10%. We don’t recommend using the ATO as a 'lender'.
5. So where to from here?
Having late and overdue tax returns means just that. It has nothing to do with being a terrible person. You haven’t committed a heinous crime. It’s just a matter of lodging the required forms to bring your tax affairs up-to-date.
We strongly recommend that you lodge your late tax returns even if you can’t pay the associated tax debt. You’d rather have just a debt, than have a debt plus late lodgments.
If you're worried about not having access to all of your tax documents, don't worry. As registered tax agents we can access your ATO pre-filling reports from as far back as 2009 financial year. We will support you throughout the entire process, and do our very best to achieve a reasonable and practical outcome with the ATO.
Our experienced accountants offer consultations by phone and by video call using Microsoft Teams, so that no matter where in Australia (or the world) you are, we are able to assist you.
You're behind. It happens. We're here. You can get in touch with us here to begin the process of feeling better about tax.