Haven’t lodged your tax return in years in Australia? If you are an Australian resident for tax purposes you will have to lodge tax returns every year. This is especially relevant if your earning is more than the Australian Taxation Office/ATO’s allocated tax-free threshold. Currently, the tax-free limit stands at $18,200.
You can claim a tax free threshold for your late tax returns. Chances are that if your employer had taxes withheld from your income you’ll get a refund back for all the taxes deducted. It would depend how you filled out your tax file number declaration form.
So, if your annual earnings are higher than the threshold, you are liable by law to lodged your tax returns. There are certain situations when even those who earn less than or equal to this amount are required to lodge tax returns.
However, when you ignore this, it ends up being overdue tax returns. There may be many different reasons behind not lodging the tax returns, such as relationship issues, health troubles, or you may have been too preoccupied.
That’s although not a right approach, but it is quite a common occurrence, as usually, people aren’t aware of the significance of filing tax returns, and possible adverse consequences of not fulfilling their financial duties. Regardless of the reason behind overdue tax returns, it’s never too late.
Believe it or not, if you lodge your tax returns at the right time, you may even become eligible for a tax refund. Conversely, the longer you wait, the higher the chances of ATO imposing a fine or interest charges on your late tax return.
So, to help you understand the significance of lodging tax returns at the right time, we have compiled a list of common queries and confusions surrounding tax returns.
Would you need to lodge tax returns if you earn less than the tax-free threshold?
If you earn less than $18,200 per year and haven’t paid any tax so far, you might not need a tax return lodged, but a “Non-Lodgment Advice” to the ATO. This will inform the ATO that you don’t qualify for tax returns. This is important to ensure that the ATO doesn’t list you with those having an outstanding tax return. Failure to do so will enable the ATO to take compliance action to force you to lodge one, considering that you need to submit it.
Will the ATO penalise you for not lodging a tax return?
Yes, you will be. If you don’t lodge your tax returns by the due date, the ATO will first issue a Failure To Lodge (FTL) penalty. The fine will be calculated as per the rate of one penalty unit for every 28 days.
If the document is long overdue, you may be fined for a maximum of five penalty units. Please note that the sanction applied automatically, and isn’t generally applied to returns that generate a refund or have a nil result. In case a penalty is applicable, the ATO may choose to remit it if the department deems it a fair and reasonable approach. This may happen in the event of a severe health issue or a natural disaster.
How late can a tax return be lodged?
All individuals taxpayers must lodge the personal tax returns by 31st October, or inform the ATO that they don’t qualify to lodge tax returns. If you don’t lodge it by the due date you are at risk of default assessment.
Additional time is granted to late tax return accountants and tax agents for lodging tax returns. Therefore, if you intend to submit your tax returns via a tax agent, you will have time until 15th May of the following year. This, however, depends upon the type of tax return.
What are the penalties for late tax returns?
Failing to lodge a tax return by the due date will compel the ATO to impose a Failure to Lodge On-Time Penalty. The ATO determines the penalty amount at the rate of one penalty unit, as mentioned above, for every 28 days, the document is overdue. The maximum amount can be up to five penalty units.
If your tax returns are overdue by 113 days, you’ll become liable for the maximum penalty of up to $1050. This means if you have outstanding tax returns of five years, you may receive a penalty of up to $4,500.
The penalty will increase if you run a company, trust, partnership-based business, or operate any business entity with an annual turnover of one to twenty million. In this case, you may be penalised for a minimum of $360 to a maximum of $1,800 per return, depending upon how late the tax returns are. So, assuming that your annual turnover is around $1.1 million and your tax returns are due for the past five years, you can expect a penalty of up to $9,000.
When is the ATO most likely to apply a penalty?
The ATO will surely apply a penalty in three situations. One, if you have more than one outstanding tax returns, two, if your lodgment history is weak, and three, if you haven’t complied with the ATO’s request to lodge your tax returns. The ATO may sometimes decide to remit penalties, but there’s certainly no guarantee that this will happen every time.
If tax isn’t due, what would be the late tax penalty?
If you don’t have any taxes due, still the late lodgment penalty will apply. Consequently, you might end up paying the fine or penalty to the ATO, which may be higher than the tax amount.
Will the ATO charge interest on late tax returns?
If you lodge your tax returns late, along with the penalty, you will be charged interest on any pending tax bill starting from the date the tax was due. The benchmark interest rate in 2018 was 8.96% p.a. Remember that the interest will be higher than the rate you pay on your mortgage.
Can I get prosecuted for not filing tax returns?
Although it is a rare occurrence, the ATO reserves the right to prosecute an individual or entity for not filing tax returns. The maximum penalty applicable if an individual is prosecuted could be either $8,500 fine or up to 12 months imprisonment.
Will the ATO audit me if my tax returns are delayed?
If you lodge tax returns late, you will be at an increased risk of being audited or reviewed by the ATO. However, if you have hired a credible tax agent to lodge your tax returns, the agent will be able to satisfy the ATO fairly well if the department raises any questions.
What to do If you haven’t lodged for tax returns on time?
The ATO will most definitely contact you if there are one or more outstanding tax returns in your name. To avoid the department from catching up on you, we suggest that you take pre-emptive actions and lodge your tax returns as soon as possible. You can contact us to make this entire process as quick and hassle-free as possible. If we see a possibility where the penalty can be remitted, we will make a case to the ATO on your behalf.
What is the Right Way to Lodge Late Tax Returns?
Lodging late tax returns is not as complicated or confusing as it is commonly perceived. Here are the top tips from our experience that will help you lodge multiple tax returns.
Step 1- Identify the number of years tax returns is overdue
First and foremost, you need to determine how many years you haven’t lodged your tax returns. This could be a complicated process, but if you consult us, we can help you out. We are registered tax agents, that’s why we can access your tax records, which you might not be able to do. Within minutes, we can check your lodgment status and inform you about your outstanding returns since 2001.
Step 2- Check if you qualify for lodging tax returns?
Although you are required to lodge something with the ATO every year, however, it may not always be a tax return. You may need to submit non-lodgment advice instead of tax returns if you meet certain conditions. This commonly applies when your annual taxable income is lower than the ATO’s tax-free threshold. Your tax agent can quickly work out the years for which you don’t need to lodge tax returns and submit non-lodgment advice.
Step 3- Prepare the records
Undoubtedly this is going to be a daunting step for you. If you haven’t hired a registered tax agent, contact us for a copy of your ATO pre-filling report. This is perhaps the fastest way to locate your missing amount of tax information. So no need to stress about lost payment summaries.
This report includes information about your total income from employers, banks, government agencies, and other entities. This information will be matched to your tax lodge number and maintained by the ATO. The report will include information about the following.
- Employers’ PAYG Payment Summaries (group certificates)
- Centrelink Payment Summaries
- Private Health Sector Insurance Cover data
- Investment Income
- Bank Interest
- HELP (HECS) Balance for the Relevant Year
A registered tax agent can obtain pre-filling reports from as far back as the year 2009 financial year. You may also request data from 2001. If you haven’t lodged tax returns for a long time, you may find it hard to locate your deductions and receipts for the relevant year.
However, some deductions can be claimed even without the receipts. In this regard, we can work out what you need to claim after assessing your investment situation and job position.
Step 4- Filling out the tax return forms
This step needs your utmost attention. You can lodge your tax returns electronically, or call us to prepare and lodge your returns.
How We Help You Avoid Tax Penalties for Late Tax Returns?
Missed your tax time? Delaying to lodge your tax returns may not be a good idea. If you haven’t submitted tax returns, we suggest that instead of sorting it out yourself, contact us to do it on your behalf.
With our experience, we may help you in avoiding tax penalties from the ATO. There are many issues that you need to consider before lodging late tax returns, which a late tax return accountant could help you with. We will review your situation and circumstances to determine whether there are grounds for a waiver or reduction in penalties and interest.
Moreover, with our expertise, you can negotiate payment arrangements with the ATO for tax liabilities to improve your cash flow. Before lodging your tax returns, our tax accountants will double-check the forms and would maximise to improve your tax refund.
Our qualified tax accountant Sydney can complete late tax returns from 2001 to 2020 and finish the returns within minutes. Similarly, we can amend your tax return should you wish to go back and revise your previous year tax return. So have a chat with us for professional advice on your tax affairs before lodging late tax returns.