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:

  • 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.
  • Any refunds will be offset to decrease the amount of your debts, 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.
  • 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, if you are registered.
  • You may be referred to a debt collection agency for amounts anywhere between a few hundred dollars and up to $100,000. However, a referral to an external debt collection agency will not affect your credit score.
  • Stronger 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?

  • Try to remit the interest, provided your interest has not exceeded $25,000. You can do this by phone, providing all your details and reasons why you do not have the funds to make your payments.
  • Write a compelling letter in which you explain the reasons and the position in which you are unable to pay the interests incurred.
  • 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!

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