Didn't Lodge A Tax Return? Here's What Happens...
First of all, do you even need to lodge a tax return?
There are a few circumstances which exempt you from having to go through the hassle:
1. If you are a foreign resident and your only Australian sourced income derives from interest, dividends, or royalties (from which non-resident withholding tax is deducted)
2. If you are a 417 or 462 visa holder and your taxable income is less than $37, 001 (however you can still choose to lodge one even if your income is less than $37, 001).
If you do not need to lodge a tax return, you must still submit non-lodgement advice to the Australian Taxation Office (ATO).
On the other hand, the following are the circumstances in which you must lodge a tax return:
1. Tax deducted from any payments made during the financial year
2. If you are an Australian resident with a taxable income above the tax-free threshold (currently set at $18, 200)
3. If you are a foreign resident who earned more than $1 in Australia
4. If you are leaving Australia permanently or for more than one financial year
5. If you choose to claim any tax deductions
So what happens if you fail to lodge a tax return?
The first penalty you may face is a fine. Named the Fail To Lodge (FTL) penalty, a unit is charged over 28 days (or part thereof) after the deadline up to a maximum of five units. Each unit is valued at $210. The maximum fine a person may face is therefore $1, 050. This penalty is lodged automatically but the ATO may remit it if it is "fair and reasonable" to do so.
In the event a penalty fails to make you lodge your tax return, the ATO may issue one or more default assessments. The assessment aims to estimate your income based on data the ATO has. Being an estimate, the assessments are regarded as rarely accurate. An assessment can be appealed, but you should be able to prove the ATO's error with data, and not the mere argument that they are wrong.
Although a fairly rare action taken by the ATO, prosecution is possible. You may be given a maximum penalty of $8, 500 or face imprisonment of up to 12 months.
It is also widely believed that lodging a tax return late increases the risk of the ATO performing an audit on you. In this case, employing a registered tax agent will aid you as they will be able to help you answer any questions the ATO may raise.
Okay, so you're late, now what can you do?
If you are already late in lodging your tax returns, you should take pre-emptive measures against any penalties by updating your tax returns as soon as possible. Another benefit of the services of a tax agent is that they will be able to make this process as painless as possible by not only lodging your tax returns for you, but also making a case for the remittance of any penalties incurred.
Good luck with getting through tax season!