Part of your business obligations is to ensure that you are meeting all lodgement and reporting deadlines as required by the Australian Tax Office (ATO). In cases where you have failed to do so, the ATO does not look upon this very favourably and if they see fit, will issue a Failure to Lodge (FTL) on time penalty. If you have received such a penalty, don’t despair just yet. In this article, we explain exactly how you can have this remitted.
How much is the FTL penalty?
For small business entities, the penalty is calculated based on a rate of one “penalty unit” which constitutes 28 days (or part thereof), up to a maximum of five (5) penalty units. Currently, any infringements that have occurred after 1 July 2017 attract a penalty amount of $210 per penalty unit. This means you can potentially be expected to pay up to a maximum of $1,050 in penalties as well as interest charged on these fines.
If you have received a penalty notice, you can request for it to be remitted in full or in part if the ATO considers your failure to be caused due to “extenuating” circumstance. This is something that is generally interpreted on a discretionary basis by the ATO but some examples may include natural disasters or serious illness. Therefore, we recommend you think carefully about whether or not you fall under such a category before calling. If you have lodged false or misleading statements, we suggest you don’t bother.
For small businesses, the quickest way to request for remission is by phone on 13 28 65 for individuals and 13 72 26 for businesses. Before calling, ensure you read over the steps below to prepare for your phone call as you only get one shot at this.
Step 1 – Get All Your Lodgements & Payments Up To Date
Before you even call, we heavily recommend that you get everything up to date – no point requesting a remission with the ATO when after some further digging, they discover there are many more lodgements or tax obligations that you have failed to meet! You want to give them no further excuses to decline your request or to issue you further fines.
Step 2 – Provide Personal Details & Have Supporting Documents Ready
The ATO will always identify you to ensure that they are speaking to the correct person. This means that they’ll be looking to verify you on the phone and will ask for your name, address, date of birth as well as some further supporting questions such as details from a previous letter you may have received from the tax office.
Once they’ve established this, provide them with the penalty details so that they can look this up within their database to ensure that both parties are dealing with the same issue.
Step 3 – Explain Your Case & Why They Should Remit You
In our experience, whilst the tax office is generally quite generous with remissions, they’re not handing these out like candy. A legitimate reason for requesting a remission is key in ensuring that they honour your request. A lot of our clients have encountered issues with their accountant, processes, software or have fallen into serious illness over an extended period of time. You must find a way to prove to them (honestly) that you had not purposely failed to meet your obligations simply because you couldn’t be bothered or actively disregarded doing it.
Safe Harbour provisions can also apply if you have an accountant or registered tax/BAS agent if the following two conditions apply:
- You can prove that you provided the agent with all relevant tax information to allow them to lodge the return or statement by the due date
- The agent’s failure to lodge the return or statement was not reckless or intentionally disregarding the law
Regardless of what the reason may be, the most important thing to emphasise is that you have taken steps to ensure that this mistake will not happen again. Whether this is hiring a new accountant, set up a payment arrangement or revised your processes, ensure that you are outlining this to the tax office representative at the time on the phone. Once you’ve explained your situation, request for leniency in your fines and interest charged.
Step 4 – Wait for a Decision
If your request is reasonable, then it’s extremely likely that you will receive a remission on your penalty. Even if you have paid the penalty and interest charged, a refund can be made if the decision is in your favour, usually in the form of a cheque.
It’s important to understand that this advice is recommended only if you have honestly failed to make a lodgement or return due to circumstances that are not intentional and in disregard of the law. For first time offenders, a certain degree of leniency is offered but repeat offences are not looked upon favourably. Therefore, it’s important to stress that you have the right systems and processes in place to ensure that you are not missing any of these deadlines again. A repeat offence is very unlikely to result in another remission.
If your circumstances are unique or you simply aren’t confident in doing this, we recommend you engage a qualified accountant to do this on your behalf. Box Advisory Services can help with evaluating your situation and giving you the right advice to ensure the best possible outcome.