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WHAT ARE THE PENALTIES AND INTEREST CHARGES ARISING FROM VOLUNTARY CORRECTIONS? HOW TO REMIT THEM?

24
May

If you realise you have made a mistake in the information you have given to ATO in a tax or super return or activity statement, then you should correct any error as quickly as possible. When you tell ATO about these mistakes or omissions in returns or statements you've lodged, ATO generally refers to it as a 'Voluntary Disclosure'. If you do not provide the correct information to ATO in legal time limits the ATO charges you interest and penalties. ATO imposes this so that the taxpayers take reasonable care in complying with their obligations. When you make a voluntary disclosure, you can expect a reduction in the penalties and interest charges that ATO normally applies. Some of these charges and penalties are:

•  General interest charge is applied to an unpaid tax liability from the date it was due to be paid until it and the accrued interest charges are paid;
• Shortfall interest charge is applied where an extra amount of tax is payable because of a corrected assessment;
• Penalties are compulsory for conduct such as not taking sensible care in claiming a deduction to which you are not allowed, or making a false or misleading statement.

Remission of general interest charges
The Tax Office can remit general interest charges fully or partially in any of the following circumstances:

•  The delay was not made by the taxpayer and he/she took a reasonable action to reduce the delay. To apply for a remission in this basis, the taxpayer needs to tell ATO what went wrong which was beyond his/her control, like natural disaster and the action that he/she took to reduce the delay, like selling assets;
• The delay was made by the taxpayer, but he/she has taken mitigating actions and the reason must be fair and reasonable to remit. The taxpayer needs to convince the ATO that the ordinary members of the community who pay their taxes on time would consider it fair that your interest is remitted;
• There were some special circumstances and the reason of it would be fair and reasonable to remit. This might be where the taxpayer has a good record of paying taxes and for this special circumstance; he/she failed to pay a tax bill. 

Remission of penalties

If you're dissatisfied with a penalty imposed on you, you may ask ATO to remit it. You can also object to some penalties through the objection process. For big penalties, or complicated cases, ATO may ask you to put your request in writing. If your compliance history is good then ATO considers all the relevant circumstances, when deciding whether it is fair and reasonable to remit the penalty in full or in part. If a tax debt was paid late rather than permanently avoided, there may be a possibility to remit the penalty in full or in part.

Remission of shortfall interest charges
If your tax return is edited and, thus, your tax liability is increased, there is a tax shortfall. You can ask for a shortfall interest charges amount (and any related general interest charges) to be remitted in full or part if there are justifying circumstances – for example, if the ATO contributed to an error that led to a shortfall, or if the shortfall amount is paid before the notice of amended assessment is issued.