Money Doesn’t Come Without Guidance ...
As a citizen of Australia, you need to pay tax on a timely manner otherwise interest or penalty may be charged on your unpaid tax liabilities. There is a long list of matters for which ATO can issue penalties. These include a failure to:
These are called administrative penalties because the ATO can issue them itself, rather than needing to take a taxpayer to court. Hence, there are two main penalties that concern the committee during the inquiry.
Shortfall penalties largely depend on the taxpayer’s conduct. The main penalties are calculated as a percentage of the taxpayer’s shortfall amount. Following table shows penalty amounts for the tax shortfall.
|Intentional disregard of a tax law||75%|
|Recklessness as to the operation of a tax law||50%|
|Scheme with the sole or dominant purpose of reducing tax||50%|
|Entered into a scheme where the treatment was reasonably arguable||25%|
|Lack of reasonable care||35%|
|Treatment not reasonably arguable and the shortfall amount is more than the greater of $10,000 or 1% of the taxpayer’s total income tax liability for that year||25%|
Reasonable care for a tax payer is determined by the individual circumstances of that taxpayer taking into account age, health, education, culture and other individual factors.
Decrease of Penalty
The ATO decreases the base penalty if the taxpayer tells the ATO about the shortfall. The reduction depends on when the taxpayer makes the disclosure. If the taxpayer does so before an audit commences, then the reduction is 100% for a shortfall of less than $1,000 or 80% for a shortfall of $1,000 or more. If the taxpayer tells the ATO after an audit starts, the reduction is 20% if the disclosure saves the ATO significant time or resources.
In order to reduce penalty, you can make request:
Why Charge Interest?
The purpose of charging interest is to ensure that:
If you are dissatisfied with an interest charge, you can ask the ATO to remit it. They can generally remit (reduce or cancel) interest charges where it is fair and reasonable for the circumstances.