Recent changes to the Commonwealth legislation have led to a significant increase in the maximum penalty that the Australian Taxation Office can impose on returns or statements that are lodged late or remain overdue.
It is also likely that there will be further increases to the penalties on a regular basis in the future.
How FTL penalties are calculated
Under the penalty regime, FTL penalties are calculated at a rate of 1 penalty unit for each 28 days, or of a period of 28 days, which a document is overdue, up to a maximum of 5 penalty units. The penalty unit was increased from $110 to $170 for offences committed after 28 December 2012. The penalties are further increased depending on the size of the taxpayer. Taxpayers classified as medium entities will have the penalty amount multiplied by a factor of 2, and entities classified as a large entity will have their penalty amount multiplied by a factor of 5.
This means that the FTL penalties can go up to a maximum of $4,250 depending on the number of days the document is overdue and the size of the taxpayer.
Size test for penalty calculation
The size of a taxpayer determines the multiplier factor in calculating the FTL penalty.
A small entity is an entity that is neither a medium or large entity.
A medium entity is an entity that satisfies any of the following conditions:
- Is a ‘medium’ withholder for Pay As You Go (PAYG) income tax withholding purposes i.e. has a total annual withholding of $25,000 to $1 million; or
- Has assessable income or current annual turnover of more than $1 million but less than $20 million.
A large entity is an entity that satisfies any of the following conditions:
- Is a ‘large’ withholder for PAYG income tax withholding purposes i.e. a total annual withholding of more than $1 million; or
- Has assessable income or current annual turnover of $20 million or more.
Returns or statements that are subject to FTL penalties
The ATO can apply FTL penalties on the following documents that are not lodged by the due date
– activity statements
– income tax return
– fringe benefit tax return
– PAYG withholding annual report
– Annual goods and services (GST) return
– Annual goods and services (GST) report
Low-risk documents and taxpayers
The ATO have advised that generally, FTL penalties will not be applied to one-off cases of late lodgement, low-risk documents or low-risk taxpayers.
Low-risk documents include documents that result in a refund or nil liability.
A low-risk taxpayer will generally have all of the following characteristics:
– No overdue lodgement obligations and no outstanding tax related debts;
– Good compliance history; and
– Neither large or part of a large group.
What this means for you
To avoid FTL penalties being imposed, you should provide your information to your Blaze Acumen adviser early. If you don’t think you are able to provide the information in a timely manner, speak to your Blaze Acumen adviser and they can look into options available to request an extension of the due date from the ATO.