There’s nothing worse than being hit with a hefty bill or letter requesting money from the ATO. That’s especially true when it’s a completely preventable fine or one that you’re not even 100% sure why you’ve received it. We’ve found a lot of our clients that manage their own tax returns and particularly, BAS (business activity statements) have been faced with a mounting fine for late lodgement or non-lodgement. So, to help you get on top of the problem and eliminate the risk of fines in the future, we wanted to give you a rundown of what the penalties mean and how you can avoid them.
How are the penalties calculated?
These penalties are pretty much what they say they are – fines for lodging your BAS, tax returns or activity statements late or not at all. For every month that they are late or not lodged, you will incur a fine of $222 (for FY 21/22). Of course, over time, this racks up – leaving you with a sizable bill if you keep putting it off.
The ATO tries to give as much leeway as possible when it comes to failure to lodge – not necessarily fining you if it is an isolated incident. However, with the ATO notifying you by text, MyGov messages, email or phone there are very few excuses to miss these lodgements. Essentially, you’ll know if you’ve made a mistake – so you just have to rectify it to avoid heavy penalties.
When notifying you of a penalty, for recurrent misses of lodgement the ATO will send you a letter detailing the lodgments missed, time incurred since they have been missed and the total penalty.
However, the key to all of this is preventing it from happening in the first place and putting measures in place to make this part of your routine business practice.
What you can do to avoid them
- Get to know the lodging system
The lodging system is essentially a yearly calendar that asks for different statements or returns at different times of the year.
For tax, this is dependent on a few key factors. Namely, how much tax you’ll owe, whether you use a tax agent and whether you’ve been prosecuted with a late/non-lodgement before.
For BAS it’s a different and more complex story. There are essentially four different types of lodgement/instalments:
- Monthly activity statements
- Quarterly activity statements
- Quarterly PAYG activity statements
- Annual GST returns
Depending on your business’ turnover and setup you may have to fulfil all of these lodgements or perhaps just the monthly activity statements. To find out more about which are necessary for your situation, check out the ATO website.
- Know what lodgement to submit and when
Now you’ve got a grip of which lodgements are relevant to your business, you need to ensure you’re lodging within the parameters set by the ATO.
For income tax returns, the deadlines are as follows:
- For individuals or entities who don’t use a tax agent, with one or more years of lodgements outstanding and those who have been prosecuted for non-lodgement the date is 31st October 2021.
- Medium to large taxpayers whose 2020 tax return was taxable (unless required earlier) – 15th January 2022.
- Entities with total income in the 2019–20 year of more than $2 million unless required earlier – 31st March 2022.
- Tax returns for all remaining individual tax payers or entities not required earlier – 15th May 2022.
For BAS these are the key dates to concentrate on:
- Monthly activity statements are due on the 21st of the next month, unless a quarterly month
- Quarterly activity statements are due on the 28th of October, February, April and July
- Quarterly PAYG activity statements are due on the 21st day of the month following the end of the reporting period
- Annual GST returns are due 3 months after the fiscal year ends
- Build it into your business processes
It’s not difficult to see that there are quite a few different lodgements, at different times throughout the year. So now it’s onto how to build this into your process. Whether you’re a one-person show or have financial help in house, it’s essential to build out a calendar that notifies you in advance of each relevant lodgement.
From this, you can schedule activities to prepare the lodgements and begin to build out effective business processes to replicate this every month. Using a project management tool is great for this or simply use the calendar attached to your emails to dial in some recurrent time to manage these processes.
- Get an expert to help
Alternatively, if you either don’t have the time, aren’t great at the technical stuff or just aren’t interested in building this out as a business process, you can enlist outside help. Saving you from any penalties and potentially saving you money when compared with just a month’s worth of fines. Be sure to do your research on your desired accountants, checking out their record and experience with ATO lodgements.
We hope you’ve found this article useful and it’s helped you to prevent any surprises from the ATO. If you’re looking for help lodging your tax returns or BAS, get in touch to chat with one of our accountants today.