What Happens If You Fail to Lodge A Tax Return On Time?

Regardless of whether you are a small business owner or a big enterprise owner, if you lodge a tax return after the due date, then you may get into trouble. The ATO has stringent rules and regulations and everyone has to follow all those rules. If someone tries to break those rules, then they may have to pay fines or penalties. 

In the case of the taxation process, if you are filing a tax return late or forget to lodge a tax return due to any reason, then the ATO (Australian Taxation Office) will issue a failure to lodge (FTL) notice. If you are managing a company’s tax returns on your own, then it might become difficult for you to manage everything on your own when your business starts growing. Thus, it would be better to hire accounting services for businesses. Keep reading this blog to know why you may receive FTL notice and what can be done at a later stage.

What is Failure to Lodge (FTL) Notice?

A failure to lodge is a notice issued by the Australian taxation office (ATO) to those who are required to file a tax return, report or statement by a specific date but fail to do so. Australians who fail to lodge their tax returns on time could face this issue. However, every time you don't need to pay fines or penalties because of late lodgment of the tax return. Generally, the ATO consider personal circumstances before deciding on issuing FTL or taking further action.

On the other hand, if you have a professional tax accountant, then you can be sure that your company’s tax returns will be paid on time, and you don’t need to worry about it. For this reason, many business owners and individuals opt for accounting services in Melbourne so they can avoid paying unnecessary amounts on taxes.

Why Would You Receive a Failure to Lodge Notice?

If your tax return has not been filed on the agreed date to the ATO, you will receive a warning, and the warning can be either in writing or on the phone to notify you that you haven’t lodged your tax return. FTL penalties can be applied to the lodgments written below:

• FBT returns

• Tax returns

• Penalty for not lodging activity statement on time

• Single touch payroll reports

• Taxable payment annual reports

• Annual GST returns

Additional manual penalties or fines can be applied if taxpayers ignore requests for lodgment. To avoid paying these types of penalties, you should pay taxes on time, or you can hire accounting solutions for your company near your area by searching ‘accounting services near me.’

How is FTL Penalty Calculated?

FTL penalties can vary, and it will depend on the size of the entity and the length of time that has passed after the due date for lodgment.

• Small Entities

At the rate of a single penalty unit, FTL penalties are calculated for each 28-day period that the tax return is overdue. The penalty can be applied up to 5 penalty units.

• Medium Entities

For medium entities, the penalty unit which is applied to small entities is multiplied by 2. Medium entities are considered medium withholders for PAYG, which have assessable income or GST turnover of more than $1 million, but it would be less than $20 million.

• Large Entities

In the case of large entities, the penalty unit is multiplied by 5. A large entity is defined as a large withholder for PAYG, which has assessable income or GST turnover of $20 million or more.

• Significant Entities

For significant entities, penalties are multiplied by 500. Such penalties have applied on or after 1 July 2017 to significant entities that have failed to lodge approved forms on a specified date.

If you have already prepared financial transaction records, then it will be easy for accountants to lodge a tax return on time. For this purpose, you should take help from the Melbourne bookkeeper to record all financial transactions so they can give those records to the accountant for taxation process.

Can You Ask for a Remission for FTL Penalties?

A taxpayer can reduce or avoid penalties by requesting FTL penalty remission. Remissions are of two types:

• In full

• In part, if there are exceptional or extenuating circumstances – for instance, if you fail to lodge a tax return on time because of a natural disaster or serious illness.

Once taxpayers’ outstanding statements or returns have been lodged, they can request FTL remission. The ATO can reduce or remit the penalty based on individual circumstances. The best method to avoid paying penalties is by lodging tax returns on time and if you don’t have time, then you can opt for accounting services where your accountant will do it for you.

Conclusion

The blog shares information on failure to lodge notice and what can be done if you receive this type of notice from the ATO. For further detail regarding this, you can also contact Reliable Melbourne Accountants.