Have you heard about the failure to lodge on time penalty? In this blog, we’ll discuss what penalties the ATO imposes and how, if you don’t meet your tax lodgment obligations on time. Let’s get started:
When Do You Receive a FTL Penalty?
If you are required to meet an obligation to lodge by a specific date, but you fail to lodge by that due date, then you are likely to receive a Failure to Lodge on Time penalty. This may include reporting Pay As You Go (PAYG) instalments, lodging your tax return, PAYG withholding, or goods and services tax (GST) on an activity statement by the due date.
How Will You Receive an FTL Penalty?
The ATO recognises that sometimes people fail to meet their lodgment obligations on time for many reasons. Usually, the ATO doesn’t apply penalties in isolated cases of late lodgment. They will pay close attention to your circumstances when deciding what actions need to be taken. If you don’t lodge, they will warn you in writing or by phone. If they apply an FTL penalty, they’ll notify you in writing and include:
- the reason why they impose the penalty
- the amount of the penalty
- the due date for payment
How Does the ATO Calculate FTL Penalty?
The ATO calculates the FTL penalty depending on the entity size and the period of time since the due date for lodgment in an approved form.
- Small entities
The ATO calculates the FTL penalty at the rate of one penalty unit for a small entity for each period of 28 days that the return or statement is overdue, up to a maximum of 5 penalty units. - Medium entities
The penalty unit is multiplied by 2 for a medium entity. A medium entity is considered a medium withholder for PAYG withholding purposes or has assessable income or current GST turnover of above $1 million and less than $20 million. - Large entities
The penalty unit is multiplied by 5 for a large entity. A large entity is considered a larger withholder for PAYG withholding purposes or has current GST turnover of $20 million or more. - Significant entities
The base penalty amount is multiplied by 500 for a significant global entity.
Lodgments to Which FTL Penalties are Imposed
An automated penalty system applies the FTL penalty to late-lodged returns, statements, and reports, including:
- activity statements
- tax returns
- FBT returns
- PAYG withholding annual reports
- Single Touch Payroll reports
- annual GST returns and information reports
- taxable payment annual reports.
The ATO may apply the FTL penalty manually. This is a situation when the taxpayer has not lodged even after a request to do so. If you don’t know what lodgment requirements you need to meet, you can ask Trusted Tax Associates for help.
When Can You Request Remission?
You are allowed to request remission of penalties if you receive a penalty notice for not lodging a statement or return on time, but you can request a remission only if there are extenuating circumstances. Extenuating circumstances may include situations such as being impacted by a serious illness or a natural disaster. It can also include other circumstances that are not in your control, which could not be predicted, and you or your agent were not able to request further time to lodge. You can ask for either a remission in full or in part.
You can request remission only after you have lodged all outstanding returns or statements. Requests for FTL remission are assessed by an officer who was not involved in the decision to apply the penalty.
Conclusion
The ATO’s Failure to Lodge on Time penalty applies when lodgment obligations are missed and increases based on how late the lodgment is and the size of the entity. While the ATO may show leniency in some cases, ongoing delays can lead to significant penalties. Lodging on time and seeking help from Trusted Tax Associates early can help you avoid or reduce these penalties.
