When you start a business, you need to perform various tasks. Knowledge regarding company taxes is important because, for a company, understanding tax requirements will help you to avoid penalties. Australian tax rules and regulations are very strict. Penalties will apply if someone fails to pay taxes on time. In today’s blog, we’ll discuss how penalties are calculated.

Failure to Meet Tax Obligations

If you fail to meet tax obligations, you’ll be liable for a penalty. The ATO will notify you and include:

  • the reason why you have to pay a penalty
  • the amount of penalty
  • the due date for payment (at least 14 days after they give you notice)

Penalties for Failing to Meet Tax Obligations

Tax Obligation Penalties for not meeting tax obligations
Keeping records as required 20 penalty units
Keeping or generating declarations as required 20 penalty units
Providing access and facilities to an authorised tax officer 20 penalty units
Applying for or cancelling GST registration when needed 20 penalty units
Issuing adjustment notes or tax invoices when required 20 penalty units
For the same taxable supply or adjustment event, neither the principal nor the agent may produce a tax invoice or adjustment note 20 penalty units
Registering as a Pay As You Go (PAYG) withholder when required 5 penalty units
Filing an activity statement electronically when needed 5 penalty units
Paying an amount electronically when needed 5 penalty units

Compliance and Penalties

Penalties may apply for purchasers or suppliers:

  • Supplier penalties

If a supplier forgets to send a supplier notification to a purchaser, then a supplier may incur one of the following penalties:

  • Strict liability offence

100 penalty units that may be sued before the court

  • Administrative penalty

100 penalty units

Penalties won’t apply if you:

  • you had a belief that you were exempt from the notice obligations.
  • made an honest and reasonable error regarding the application of the notice requirements to a specific supply.
  • Purchaser penalties

Most commonly, there are two types of penalties for purchasers:

  • If a purchaser forgets to pay an amount, the administrative penalty is equivalent to the amount the purchaser needed to pay. Exceptions to this include:
    • there has been reliance on the notice of a supplier
    • the purchaser has given a bank cheque to the supplier, which is payable to the Commissioner of Taxation for the withholding amount.
  • If a purchaser forgets to notify the ATO, they must withhold
    • failure to lodge administrative penalty: one penalty unit for each 28-day period
    • entities may incur higher penalty units based on their turnover.
How to Request a Penalty Remission?

You can request for a partial remission or cancellation (full remission) of any incurred penalty, including penalties that fail to:

  • lodge documents on time
  • withhold amount as needed
  • meet other tax obligations

When you request a review of a penalty, make sure to include:

  • your full name
  • contact details
  • your Australian Business Number (ABN) or tax file number (TFN)
  • the reasons you think it is appropriate for ATO to remit the penalty in your circumstances
  • penalty amounts detail and the dates when penalties were imposed

Now, you have an idea of what would happen if you don’t lodge taxes on time. Therefore, make sure to pay your taxes on the mentioned date. Moreover, you can speak to Reliable Melbourne Accountants for more information.

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