Tax time can be a stressful time for many individuals and business owners. With multiple lodgements and deadlines to navigate, it’s easy to understand why some may procrastinate or, worse still, forget to lodge altogether. However, missing the tax return deadline can lead to a range of consequences, from penalties to more severe actions by the Australian Taxation Office (ATO) such as legal action.
Here’s a look at what might happen if you don’t file your tax return on time and how you can avoid these issues and consequences:
1. Late Lodgement Penalties
The ATO imposes a Failure to Lodge on Time (FTL) penalty if you don’t submit your tax return by the deadline. The penalty starts at $313 (subject to change) for every 28-day period that your tax return is late, capped at $1,565.
How to Avoid: If you know you’ll have difficulty meeting the deadline, consider seeking an extension or better still working with a tax accountant Melbourne or a business accountant (if you have a business) who can help deal with the ATO. The accountant can use their experience to navigate through ATO requirements and reduce any penalties for their client. Sometimes, the ATO may waive the FTL penalty if you can demonstrate that exceptional circumstances prevented you from lodging on time (e.g. death to an immediate family member).
2. Interest on Outstanding Debt
If you owe tax, failing to lodge your tax return on time can lead to interest charges on the outstanding debt. The ATO applies a General Interest Charge (GIC) on unpaid amounts, which is calculated daily. The interest rate can often be above 10% per annum.
How to Avoid: It’s essential to lodge on time, even if you cannot pay the entire amount. The ATO may be willing and able to set up a payment plan to help you pay off your debt gradually, reducing interest charges in the long term.
3. Potential Legal Consequences
In rare cases where individuals or businesses repeatedly fail to lodge their tax returns, the ATO may take serious further action. This could include issuing what’s called a default assessment, which is an estimated tax liability based on available information. Furthermore, they could even take legal action. Persistent non-compliance can result in fines or court orders to pay overdue amounts and in extreme cases, jail time.
How to Avoid: Regularly lodging your tax return helps maintain a positive record with the ATO. If you’re struggling with repeated deadlines, working with a tax accountant Melbourne or a business accountant (if you have a business) can help you stay compliant. Nobel Thomas can help in this regard.
4. Loss of Government Benefits
Some government benefits, such as family tax benefits and childcare subsidies, are linked to your tax return. If you don’t lodge on time, you may lose access to these benefits, or they may be delayed. Generally, you need to lodge your personal tax return by 30 June the following year for government benefits not to be impacted. For example, the 2024 individual tax return needs to be lodged by 30 June 2025 for government benefits not to be impacted. The government may pause payments until your tax obligations are met.
How to Avoid: Lodging on time can ensure your government benefits continue uninterrupted. Your tax accountant Melbourne, such as Nobel Thomas, can offer reminders to help clients keep up with lodgement due dates.
5. Complications with Future Tax Lodgements
Failure to lodge a return may lead to further scrutiny from the ATO, potentially triggering audits or reviews in subsequent years. Furthermore, lodging one tax return late is likely to result in the ATO asking for the following tax return to be lodged earlier. For example, suppose your lodgement due date for your 2024 tax return is 15th May 2025. Suppose that you lodge the 2024 return late on 23rd July 2025. The lodgement due date for the following tax return, the 2025 tax return, maybe be brought forward form 15th May 2026 to 31st October 2025.
How to Avoid: Lodging on time can help ensure smooth tax seasons in the future.
Steps to Take if You’ve Missed the Deadline
If you’ve missed the deadline, here’s what you can do to minimize penalties and get back on track:
- File as Soon as Possible: The sooner you lodge, the fewer penalties you’ll receive, and you maybe able to save on interest.
- Contact the ATO: In some cases, you may be able to negotiate a waiver of late fees and interest if you can demonstrate legitimate reasons for the delay.
- Seek Professional Help: A tax accountant Melbourne or a business accountant (if you have a business) can help manage your outstanding returns and negotiate payment plans or penalty reductions with the ATO.
