The ATO Gets Serious on Late Lodgement Penalties

The following the change came into effect on 28 December 2012

increasing the value of a penalty unit from $110 to $170.

This means the maximum penalty has increased from 5 x $110 ($550) to 5 x $170 ( $850)

 

What is FTL penalty?

FTL penalty is an administrative penalty that may be applied if your client is required to lodge a return, notice, statement or other approved form with us by a particular day, and does not do so.

The application of FTL penalty is not dependent on us receiving the document - the penalty applies whether or not the document is ultimately lodged.

FTL penalty does not apply to documents required to be lodged under the following Acts:

• Superannuation Contributions Tax (Assessment and Collection) Act 1997
• Superannuation Guarantee (Administration) Act 1992
• Superannuation (Self Managed Superannuation Funds) Supervisory Levy Imposition Act 1991.

What is an approved form?

An 'approved form' is defined in section 388-50 of schedule 1 to the Taxation Administration Act 1953 (TAA 1953).

Approved forms include:

• activity statements
• income tax returns
• fringe benefits tax (FBT) returns
• pay as you go (PAYG) withholding annual reports
• annual goods and services tax (GST) returns
• annual GST information reports.

How is FTL penalty calculated?

FTL penalty is calculated at the rate of one penalty unit for each period of 28 days or part thereof that the document is overdue, up to a maximum of five penalty units. Size tests also apply, so that the penalty for larger entities is multiplied by either two or five.

Under most Commonwealth laws, financial penalties are expressed in terms of 'penalty units' instead of dollar figures. The value of 1 penalty unit has been $110 since 1997, and increased to $170 on 28 December 2012. For failing to lodge on time penalty, the increased rate will only apply where the first day of the relevant 28-day period or part thereof occurs on or after 28 December 2012.

The size of an entity is related to its assessable income, withholder status, or its current GST turnover.

We will calculate the period of time the document is overdue from the day the document is due to be lodged to the day before the document is received.

If the document is not received (that is, not lodged), we will calculate the penalty from the lodgment due date to the day before the day penalty is applied. If we have not applied the maximum penalty allowed by law to a document that is not lodged, we may increase the penalty amount at a later date.

The longer your client takes to lodge a document after its due date, the higher the amount of penalty that may be applied. The maximum amount of FTL penalty for any particular sized entity will be reached if the document is lodged more than 112 days after its lodgment due date

When will FTL penalty not be applied?

We will not apply FTL penalties unless we have warned your client about a document that is late or not lodged at all - this warning may be made by phone or in writing.

Generally, penalty will not be applied to a late-lodged income tax return, annual GST tax return or activity statement, where the lodgment results in either:

• a refund
• a nil result - that is, neither a debt nor a refund.

However, if FTL penalty has been applied before the lodgment of the document, the fact that the subsequent lodgment of the document results in a refund or nil result will not be sufficient reason for the penalty to be remitted.

for more information, visit the ATO at http://www.ato.gov.au/taxprofessionals/content.aspx?menuid=0&doc=/content/20967.htm&page=1&H1