The new financial year has arrived and with it, tax obligations.
And while gathering your receipts and taking the time out to file a return or visit an accountant might seem arduous, it’s worth it. Failing to lodge can lead to fines and even prosecution.
When is the deadline for tax returns?
Australians will need to lodge their tax returns by 31 October 2019 if they’re lodging individually. However, if they’re lodging with an accountant or tax agent, they simply need to be registered with the tax agent before this date. This will effectively buy you another seven months to lodge.
Do I need to lodge a tax return?
Generally, yes. While foreign residents and working holiday makers earning less than $37,001 a year are exempt, most others will have to lodge a return.
If you’re earning less than $18,200 and didn’t pay any tax you might not be required to lodge. But, it’s still important to submit a non-lodgement notice to the Australian Tax Office (ATO) to avoid ending up on their naughty list. Pensioners also aren’t exempt.
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If you’re unsure about whether you need to lodge a tax return, your best bet is to use the ATO’s “Do I need to lodge a tax return?” calculator.
This calculator will ask a series of questions and then determine if you’re required to pay a tax return.
Do I get a fine if I don’t lodge my tax return?
If you don’t lodge a return, the ATO will do a few things.
The ATO will first contact you with SMS messages, messages in MyGov, by phone and by letter, asking why you haven’t yet lodged.
You may also be hit with a Failure to Lodge (FTL) penalty. The weight of this penalty is determined by the income of the taxpayer.
For taxpayers with an assessable income of less than $1 million, this penalty is $210 for every 28 days the lodgment is late, and can get as high as $1,400.
For those with an assessable income of more than $1 million and up to $20 million the penalties double, and for those with an assessable income of more than $20 million, the penalty is multiplied by five.
However, if your tax return generates a refund (that is, money will be returned to you after filing the return), the ATO is pretty reticent to levy a penalty.
What else can happen if I don’t file my tax return?
The ATO may also refer some overdue lodgements to collection agencies who will attempt to obtain lodgement in the ATO’s name. If an external agency is assigned your tax return, they will let you know by phoning you and in writing, asking for your overdue documents. They will also request you pay any debt.
If this doesn’t work, the ATO may select to audit your tax situation and even prosecute.
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“If you don't work with us to address your overdue lodgment, we can make the decision to prosecute you through the relevant court of your state or territory. This action will include a summons to attend court,” the ATO said.
“Failing to lodge is a criminal offence and once convicted by the court you could face additional fines and/or imprisonment for up to 12 months. Our decision to take this type of action will not be treated lightly so before any action commences we will notify you of our intentions (usually by phone and in writing) and allow you sufficient time to bring your overdue lodgments up to date.”
What if I made a mistake in my tax return?
If it’s a small mistake, the ATO won’t apply the penalty.
Instead, it’ll highlight the error and explain how to get it right for the next year.
“The aim is to help you get back on track if you have made an inadvertent error.”
In most instances, the ATO will waive the penalty if it believes the error is due to the taxpayer not taking reasonable care, or taking a position on income tax that is “not reasonably arguable”.
But if you’ve made a mistake before, committed fraud, evaded tax or acted recklessly, you’re out of luck.
The same goes for “wealthy individuals and their businesses”.
Still not sure? $1,080 might convince you
Taxpayers earning between $48,000 and $90,000 will receive an extra boost in their tax refund this year of $1,080 after the Coalition’s ambitious tax cut package passed through the Senate on Thursday (4 July).
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