Will I Get Fined for Lodging My Tax Return Late?

Are you automatically fined for lodging late?

Not necessarily. The Australian Taxation Office can apply penalties when required tax returns or other documents are lodged late, but a penalty is not automatically applied to every person who misses a tax return deadline.

The ATO considers a taxpayer's circumstances when deciding whether a Failure to Lodge on Time penalty should apply. That does not mean you should keep delaying an overdue return. The sooner you identify what is outstanding, the sooner you can determine whether you owe tax, are entitled to a refund or simply need to bring your lodgments up to date.

How do late tax return penalties work?

If you were required to lodge a tax return and did not lodge it by the due date, the ATO may apply a Failure to Lodge on Time penalty.

For smaller taxpayers and entities, the base penalty is generally calculated using penalty units for each 28-day period, or part of a 28-day period, that the document remains overdue. The standard calculation is capped after five 28-day periods for the relevant document.

Whether a penalty is imposed can depend on the circumstances. Being late does not automatically mean you will receive the maximum possible penalty.

• How late the return is.
• Whether this is an isolated late lodgment.
• Your previous compliance history and personal circumstances.
• Whether the ATO has contacted you about the overdue return.
• The number of outstanding returns or documents.

What if my tax return is several years late?

Being several years behind does not mean that one Failure to Lodge penalty continues increasing indefinitely. The standard base calculation for an individual document is capped.

However, each outstanding financial year may be a separate lodgment obligation. If four tax returns are outstanding, there may be four separate returns to address, and additional consequences may arise if one or more returns results in tax owing.

Identify exactly which years are outstanding rather than assuming every missing year will have the same outcome.

Late lodgment and late payment are different

A late-lodgment penalty relates to failing to lodge a required tax return or document by its due date. A tax debt relates to money you owe the ATO.

If an overdue return results in tax payable, interest may apply to the unpaid amount. The ATO refers to this as the General Interest Charge, or GIC.

An overdue return could result in a refund, no tax payable or an amount owing. Different financial years may also produce different outcomes. You will not know your actual tax position until the outstanding returns have been reviewed and prepared.

What if my late tax return gives me a refund?

Being late does not automatically mean that you owe the ATO money. Depending on your income, tax withheld and eligible deductions for the relevant financial year, an overdue return may result in money being refunded to you.

Some taxpayers delay lodging because they expect a large bill, only to discover they were entitled to a refund. Preparing the return is the only way to know the actual result.

What if I cannot afford the tax bill?

Lodging a return and paying a resulting debt are separate steps. If an overdue return creates an ATO debt and you cannot pay the entire amount immediately, you may be able to arrange a payment plan with the ATO.

A payment plan may allow the debt to be paid through instalments, although interest can continue to apply while an amount remains outstanding. Ignoring an overdue return generally gives you less certainty and fewer options.

Can an ATO late-lodgment penalty be reduced?

In some circumstances, you can ask the ATO to remit, or reduce, a penalty. The ATO can consider requests to remit certain penalties, including Failure to Lodge penalties, either partially or completely.

Penalty remission is not guaranteed and each case is considered individually. If a penalty has already been applied, it may still be worth understanding why it was imposed and whether your circumstances support requesting remission.

• What caused the late lodgment.
• Whether circumstances were outside your control.
• Your previous compliance history.
• The steps you have taken to correct the problem.
• Your individual circumstances.

What if I am five or ten years behind?

Start by identifying exactly which financial years the ATO considers outstanding. Each year can then be reviewed to determine whether you need to lodge a tax return or submit a non-lodgment advice because you were not required to lodge for that year.

Old tax returns do not disappear simply because several years have passed. Dealing with each year separately can make the catch-up process more manageable and give you a clearer picture of your overall tax position.

What information might I need?

The records required depend on the year and your circumstances. Not having every document immediately available does not necessarily mean you should continue putting the return off. A tax professional can help identify what information is available and what still needs to be located.

• Employment income and PAYG income statements or payment summaries.
• Bank interest, dividends and other investment income.
• Rental property income and expenses.
• Private health insurance information.
• Work-related expenses, receipts and supporting documents.
• Share, cryptocurrency and other investment records.
• Previous tax records and ATO correspondence.

Do not let one late return become several

One overdue tax return can easily become several years of outstanding lodgments. Taking the first step gives you something more useful than worrying about what might happen: a clear understanding of your actual tax position.

You can then determine which returns need to be lodged, whether tax is payable, whether refunds are due and whether any penalties or interest need to be addressed.

Common questions

Will I automatically be fined for lodging my tax return late?

No. The ATO can apply a Failure to Lodge on Time penalty, but a penalty is not automatically imposed in every case. Your circumstances and compliance history may be considered.

Does one late-lodgment penalty keep increasing forever?

The standard base calculation for an individual overdue document is capped. However, separate outstanding tax returns can each represent a separate lodgment obligation.

Can I get a refund from an overdue tax return?

Yes. An overdue return can result in a refund, no tax payable or an amount owing. The result depends on the income, tax withheld and eligible deductions for that financial year.

Can I arrange a payment plan if an overdue return creates a tax debt?

You may be able to arrange an ATO payment plan if you cannot pay the full amount immediately. Interest may continue to apply while the debt remains unpaid.

Can a Failure to Lodge penalty be reduced?

You can ask the ATO to remit certain penalties. Remission is not guaranteed and the ATO considers each request based on its individual circumstances.