If you’ve failed to lodge a tax return, you probably have your reasons. Maybe you were working or travelling overseas for an extended period. Maybe you were having health issues. Or perhaps you were just too busy. The problem is that the Australian Tax Office (ATO) always keeps track. You could face fines, late tax return penalties, interest charges, prosecution, or even jail time if you fail to do the right thing and get your overdue tax return sorted out.
Thankfully, there are things you can do if you’ve failed to file a tax return. Your first and most crucial step should be to contact a certified tax accountant who can set you in the right direction and handle all the paperwork for you. Read on for all the other details, plus an overview of the steps you’ll need to take.
Do I need to lodge a return?
If you earn more than the tax-free threshold – which is $18,200 as of 2023 – you need to lodge a tax return for that financial year.
What happens if you earn less than the tax-free threshold in a given financial year?
You still need to lodge a tax return if your employer has taken $1 or more of tax from your wages. Even if you earn below $18,200 in a financial year and none of your employers deducted any tax, you should still send a ‘Non-Lodgement Advise’ to the ATO. This lets the ATO know that you don’t need to lodge a tax return for that tax year, and it will keep your ATO record clean.
What happens if I don’t lodge my tax return?
You may receive a Failure To Lodge (FTL) penalty, which will be calculated at the rate of one penalty unit for every 28 days after the due date, up to a maximum of five penalty units. The rate for one penalty unit varies depending on the year in which the infringement occurred. The penalty will apply if there is a refund due or tax is payable. Late interest will also be due if the result is a tax liability.
Will I be prosecuted if I don’t pay my tax?
Failure to lodge a tax return is an offence under section 8C of the Taxation Administration Act 1953. The ATO will give you a chance to pay your debt, but they can and will prosecute you for failing to lodge your tax return. The maximum penalty they can apply is $8,500 or imprisonment for up to 12 months. You will still need to pay your debt on top of your late tax return penalty.
Pro tax tip: If you receive a summons, it’s crucial to seek the advice of a tax accountant because of the strict consequences of this crime. Don’t stress if this has happened to you, but do contact ITP now to get an experienced tax agent on the case and working to get you the best outcome possible.
What if I can’t pay my overdue tax?
The ATO can be reasonable and will help you with a payment plan if you lodge your tax return accurately and honestly. You may also be eligible for remissions on penalties and interest charges. These costs can mount up, so it’s worth speaking to your tax accountant to see if they can get the ATO to reduce the charges due to special circumstances.
What happens if I get a default assessment?
If you haven’t lodged your tax return – particularly if you’re behind by several years – the ATO may issue you with a default assessment. This is an estimation of your income based on available data, and it may appear to be incorrect or inflated. You can appeal your default assessment, but you will need to substantiate your claims. You will also be at increased risk of receiving an audit. If this applies to you, it may be worth reading our guide covering what to expect from an ATO audit after you finish this article.
External collection agencies
The Australian Tax Office uses an external collection agency to collect overdue lodgements. This external collection agency generally focuses on income tax and activity statement lodgements. The ATO will notify you or your tax agent before referring your overdue lodgement to collections. At this stage, it generally won’t affect your credit rating. However, if you don’t answer the collection agency, the ATO will proceed with stronger action.
If I haven’t lodged my return, what should I do next?
You’re probably feeling a bit freaked out at this point, but please don’t panic. If you do have a late return, it’s best to lodge it as soon as possible to avoid interest and late tax return penalties. Speak with an ITP tax agent who will be able to determine if you are eligible for remissions. While stressing out about it won’t help, it is important to prepare yourself for the chance that you may face prosecution.
Your ITP tax agent will help you handle correspondence from the ATO, and with our help, you’ll have your strongest chance of avoiding serious action. If you’re worried or unsure of what to do, it’s best to speak with an ITP tax agent about what your next steps should be.
We call ourselves the “Income Tax Professionals” for good reason. Every one of our highly trained accountants has specialised in tax law. So if you’re behind on your tax returns, our professionals can help you with all the paperwork and guide you through the entire process, keeping you safe, calm, and confident.
With over 240 branches throughout Australia, ITP helps over 300,000 Australians with their taxes each year. We also offer remote, after-hours, and email appointments. So, no matter what your circumstances are, we have a tax specialist on hand to help you out. Contact us now to get positive action underway.