Individual Taxpayers are Australians and Australian Residents who earn over the tax-free threshold of $18,200. Those who earn more than that are required to submit an income tax return annually to the Australian Taxation Office (ATO). Failing this, the ATO has procedures in place to ensure taxpayers meet their Australian Tax obligations.

Here is what will happen if you fail to lodge your tax return:

1. Interest will accrue

On your unpaid tax and late lodgement penalties will apply on your non-lodged tax return. General Interest Charges are approximately 10% per annum and penalties for late lodgement or non-lodgement are set at a minimum of $210, up to a maximum of $1050.

2. Any refunds will be offset

To decrease the amount of your debts any tax refunds will be offset, should you have any. This means that any refunds owing to you will be used to pay down other prior year ATO debts you may have incurred.

3. The ATO will make contact

By many reasonable means after the due date via SMS, letters, phone calls and direct messages in the MyGov app the ATO will make contact – if you are registered.

4. You may be referred to a debt collection agency

For amounts anywhere between a few hundred dollars and up to $100,000 you may be referred to a debt collection agency. However, a referral to an external debt collection agency will not affect your credit score.

5. Stronger action

More severe action will only be taken if you are unwilling to work with the ATO or have repeatedly defaulted on payment arrangements, as well as other reasons, which can be found on the ATO website. Examples of “stronger action” include:

  • A garnishing notice
  • Director penalty notices
  • Issuing insolvency proceedings
  • Fines of up to $8500
  • Imprisonment of up to a year

What can you do about interest and penalties?

1. Try to remit the interest

Provided your interest has not exceeded $25,000 you can try to remit the interest. You can do this by phone, providing all your details and reasons why you do not have the funds to make your payments.

2. Write a compelling letter

Write a compelling letter in which you explain the reasons and the position in which you are unable to pay the interests incurred.

3. Work with the ATO

Work with the ATO by using the BAS Agent Portal or the Tax Agent Portal, provided you are a registered agent. Moreover, if you merely communicate with a fair and reasonable attitude, you may be surprised at the fairness of the department.

If you are still having difficulties and have not received any satisfactory advice from the ATO, or if you’d like to receive advice before you begin communication with the ATO, you should consult with a professional tax accounting firm. Contact Stones Sharp, an experienced CPA accounting firm today!

Shane Borg

Shane Borg


Shane is a Fellow of the Australian Society of Certified Practicing Accountants and a Chartered Accountant.

Shane’s passion is to consider the clients, the client’s business and taxation affairs with a holistic approach whilst providing business mentoring, business strategies, systems development, taxation advice and taxation planning in order to assist his clients and their business achieve their goals.

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