How penalties work
Tax laws authorise us to impose administrative penalties when you don’t meet your tax obligations. For example, we can impose a penalty if you make a false or misleading statement.
The purpose of penalties is to encourage taxpayers to take reasonable care to comply with their obligations.
The law specifies the conditions under which we can apply a penalty and the amount of the penalty. However, we have discretion to remit all or part of the penalty or cancel it, according to individual circumstances.
How to request remission or cancellation of a penalty
If you disagree with a penalty, you can dispute it.
Some types of penalties you can only dispute by lodging an objection. For all other types of penalties, you can ask us to remit or cancel the penalty.
Penalties you can only dispute through an objection
You need to lodge an objection if you're disputing a penalty for:
- a tax shortfall
- false or misleading statements in a
- tax return
- business activity statement
- fuel scheme claim form
- super statement, including member contribution statement, lost member statement and departing Australia superannuation payment report
- failing to provide a document we request, such as a tax return.
Penalties you can ask us to remit or cancel
If the penalty is not one that requires an objection, you can ask us to remit it, in full or part, or cancel it. This applies to most penalties, including penalties for failing to lodge documents on time and failing to withhold pay as you go withholding amounts.
You can write to us either:
Australian Taxation Office
PO Box 327
ALBURY NSW 2640
Make sure to include:
- your full name
- your contact details
- your tax file number (TFN) or Australian business number (ABN)
- the reference number from the letter advising you of our decision
- the reasons you think it is fair and reasonable for us to remit or cancel the penalty in your situation
- details of the penalty amounts ($) and dates the penalties were imposed (if known).
For small penalties and simple cases, you can make your request by phone.
How we assess a request
One of our key principles is that taxpayers who under-report their income, overclaim their credits, or delay paying their tax should not gain an advantage over taxpayers who do the right thing.
In deciding whether to remit a penalty, we also consider things like:
- your compliance history and your attitude toward complying with the tax laws
- your tax debt
- the reasons for the increased tax (or reduced credits) that led us to impose penalties
- whether we became aware of the shortfall as a result of your voluntary disclosure or because of our compliance efforts.
Compliance history
We treat taxpayers with a good compliance history more leniently than those who aren't compliant. The weight we give to compliance history varies depending on the circumstances.
A good compliance history is generally one where you:
- have met all your lodgment obligations on time (including lodging activity statements and tax returns)
- have paid all non-disputed debt (or have a payment arrangement)
- haven't recently been liable for a penalty.
Your tax debt
We may remit or cancel the penalty if your tax debt was paid late (deferred) rather than permanently avoided. Whether we reduce your penalty in part or in full may be influenced by:
- how long your tax debt was deferred for
- the amount of tax avoided as a result of the deferral.
For example, a penalty may be remitted in full if you accounted for your GST on the wrong activity statement (that is, in the wrong period) or claimed a deduction or credit in the wrong return or activity statement, but there is no overall shortfall amount after the assessment. However, a penalty may only be remitted in part if the amount of tax you avoided as a result of the deferral was high.
Our decision
If we decide not to remit the penalty amount in full or cancel the penalty, we will send you a letter to explain our decision.
If you've objected to a penalty and are dissatisfied with our decision on your objection, you can seek an external review through the Administrative Review Tribunal, or appeal our decision to the Federal Court.