Tax Return:: Consequences of Failing to Lodge Your Tax Return

Hello, this is your tax accountant, P&C Tax Professionals.

Failing to lodge your tax return in Australia can have serious consequences, ranging from financial penalties to legal action and even affecting your ability to access certain government benefits. Despite the risks, many people still fail to meet their tax obligations either due to a lack of understanding or intentional avoidance. In this blog post, we’ll explore the consequences of failing to lodge your tax return in Australia and provide tips on how to avoid them. Whether you’re a sole trader, employee, or a business owner, understanding your tax obligations and meeting them on time is crucial to stay compliant with the law and protecting your financial well-being. So, let’s dive in and explore what can happen if you don’t lodge your tax return in Australia.

What if my taxable income is below $18,200? Do I still need to lodge my tax return?

Even if you did not have any income and did not pay any tax for a given financial year, you would still have to submit a non-lodgment advice (NLA) to the ATO. This basically states that you are no longer obligated to submit a return and therefore, the ATO would no longer consider you as having an overdue tax return. If you fail to provide a non-lodgment advice, the ATO will assume that you must submit a return and may take enforcement action to compel you to do so.

Fines for not lodging your tax return

To begin with, if you fail to submit your tax return by the deadline, the ATO will impose a penalty known as Failure To Lodge (FTL). This penalty is computed by adding one penalty unit for each 28-day period or part thereof that the document is overdue, and it cannot exceed five penalty units in total. Currently, a penalty unit is valued at $275 (for infringements that occurred on or after 1 January 2023), which means that the highest possible penalty that an individual may incur is $275 x 5 penalty units = $1,375.

Penalties imposed on late lodgment of tax returns

If you failed to lodge a tax return despite penalties, particularly when multiple years are overdue, the ATO may issue one or more default assessments based on their own estimate of your income. However, since these are only rough estimates and do not consider your deductions, they usually overestimate your tax liability. You have the right to appeal a default assessment but in order to do so, you would need to provide evidence of your actual tax liability.

However, please keep in mind that prior to issuing a default assessment, the ATO will send a notice to the taxpayer or their registered tax agent as a warning. This notice will contain information regarding the default assessment, including the date by which the overdue obligation must be submitted to avoid the issuance of the default assessment. If the overdue tax return is still not lodged by the deadline indicated in the warning letter, the ATO will then proceed with the default assessment, along with the corresponding administrative penalties.

If you have an overdue return, P&C Tax Professionals can get assist you in getting your tax obligations up to date. Simply reach out to us via our official Facebook Page (P&C Tax Professionals – Australia) or send us your enquiry to pnctax@naver.com.

Thank you and bye for now!