Tax Penalties Under the Australian Taxation Office (ATO)

The ATO’s penalty regime is designed to:

• Promote voluntary compliance with tax obligations,
• Discourage inaccurate reporting or delayed lodgements,
• Ensure fairness between compliant and non-compliant taxpayers.

Penalties can be administrative (for procedural failures like late lodgement) or shortfall penalties (when the tax you report is incorrect). In more serious cases, criminal penalties may apply where fraud or intentional deception is proven.

Common Types of Penalties

Failure to Lodge on Time (FTL)

One of the most frequently encountered penalties is for late lodging tax returns or activity statements (such as BAS or PAYG instalments). If a taxpayer fails to lodge by the due date:

• The ATO applies a “Failure to Lodge on Time” penalty.
• The amount is calculated using penalty units (each unit is a monetary value legislated by the government).

How it works in practice:

• For individuals, one penalty unit is charged for every 28 days (or part thereof) the return is late, up to a maximum of five units.
• The amount of an FTL penalty is based on. the type and size of the entity at the time the document was due to be lodged and how long it’s been since the due date of the lodgements.
• Based on recent rates, one penalty unit currently sits around $330 — meaning a maximum of about $1,650 in lodgement penalties if the return is significantly overdue.
• Larger entities face multiplied amounts (e.g., 2× or 5× for medium and large businesses).

FTL penalties are applied for late-lodged returns, notices, statements or other documents, including:

• activity statements
• tax returns
• FBT returns
• PAYG withholding annual reports
• Single Touch Payroll reports
• annual GST returns and information reports
• taxable payment annual reports
• Combined Global and Domestic Minimum Tax Return (CGDMTR)
• Global Information Return (GIR).

It may apply FTL penalties in situations of escalating non-compliance – for example, where a taxpayer has not lodged after a request to do so.

Failing to register for GST when required, or failing to issue required tax invoices, can also trigger separate administrative penalties based on unit amounts.

Shortfall and false or Misstatement Penalties

If you understate your tax or make inaccurate claims, the ATO can impose penalties depending on how the error occurred:

• Failure to take reasonable care: Generally, you fail to take reasonable care if you have not done what a reasonable person in the same circumstances would have done. Using a tax agent does not by itself mean you have taken reasonable care. 25% of the shortfall amount.
• Recklessness: You are reckless if a reasonable person in your circumstances would have been aware that there was a real risk of a shortfall amount arising and you disregarded, or showed indifference to, that risk.50% of the shortfall.
• Intentional disregard: You intentionally disregard the law if you are fully aware of a clear tax obligation and you disregard the obligation with the intention of bringing about certain results (underpaying tax or over-claiming an entitlement) 75% of the shortfall.

False or misleading statement penalty – no shortfall amount

You are liable for this penalty if you, or your tax agent, make a false or misleading statement that does not result in you having a shortfall amount.

you will not be penalised where either:

• you or your tax agent (if relevant) took reasonable care in making the statement
• you applied a tax law in a particular way, and that way agrees with our advice, published statements or general administrative practices in relation to that tax law.