Penalties for significant global entities
Administrative statement penalties, scheme penalties and failure to lodge (FTL) on time penalties are increased when they are applied to significant global entities (SGEs). Administrative statement penalties and scheme penalties are doubled, and the FTL penalties are significantly higher.
There are different ways we calculate these penalties.
Administrative statement penalties
- are doubled from 1 July 2017 (twice the amount that applies to all other taxpayers) for SGEs that make a false or misleading statement
- take a tax position that is not reasonably arguable
- fail to provide documents when required and we determine the liability without the document.
The doubled penalty applies from:
- 5 December 2019 for a SGE subsidiary member of a consolidated group or a multiple entry consolidated (MEC) group
- 1 July 2020 for entities satisfying the updated SGE definition per Treasury Laws Amendment (2020 Measures No. 1) Act 2020
- 1 July 2017 for all other SGEs.
False or misleading statement penalty – shortfall amount
A SGE will be liable for this penalty if the entity makes a false or misleading statement (for example, in a tax return, activity statement or amendment request) that results in the entity having a shortfall amount. If the SGE has a tax agent, the entity will also be liable for any false or misleading statements made by the tax agent on the entity's behalf.
The shortfall amount is the difference between the correct tax liability or credit entitlement, and the liability or entitlement worked out using the information the entity provides. Generally, an entity will not be penalised where the entity:
- or the entity’s tax agent (if relevant) took reasonable care in making the statement – however the entity may still be subject to another penalty provision, such as taking a position that is not reasonably arguable
- 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.
The base penalty is a percentage of the shortfall amount. The percentage used is determined by the behaviour that led to the shortfall, and is then doubled for SGEs. If the SGE has a tax agent, it will be determined by their behaviour as well.
|
Behaviour |
Base penalty amount for SGEs |
|---|---|
|
Failure to take reasonable care |
50% of the shortfall amount |
|
Recklessness |
100% of the shortfall amount |
|
Intentional disregard |
150% of the shortfall amount |
The base penalty amount can be increased or reduced if there are aggravating or mitigating circumstances, or remitted where it is fair and reasonable to do so.
For more information, see PS LA 2012/5 Administration of the false or misleading statement penalty – where there is a shortfall amount.
False or misleading statement penalty – no shortfall amount
A SGE will be liable for this penalty if the entity, or their tax agent, makes a false or misleading statement (for example, in an objection, private ruling request or during an audit) that does not result in the entity having a shortfall amount. Generally, an entity will not be penalised where the entity:
- or the entity’s tax agent (if relevant) took reasonable care in making the statement
- 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.
The base penalty is calculated as a multiple of a penalty unit. The multiple used is determined by the behaviour that led to the false or misleading statement, and is then doubled for SGEs. If the SGE has a tax agent, it will be determined by their behaviour as well.
|
Behaviour |
Base penalty amount for SGEs |
|---|---|
|
Failure to take reasonable care |
40 penalty units |
|
Recklessness |
80 penalty units |
|
Intentional disregard |
120 penalty units |
The base penalty amount can be increased or reduced if there are aggravating or mitigating circumstances, or remitted where it is fair and reasonable to do so.
For more information, see PS LA 2012/4 Administration of the false or misleading statements penalty – where there is no shortfall amount.
Taking a position that is not reasonably arguable
If a SGE or their tax agent treats an income tax or petroleum resource rent tax (PRRT) law as applying in a manner that is not reasonably arguable, and the resulting shortfall amount exceeds a certain threshold, the SGE will be liable for a base penalty of 50% of the shortfall amount. The threshold is greater of:
- $20,000 or 2% of the entity's net income (if any) worked out on the basis of its return for partnerships and trusts
- $10,000 or 1% of the taxpayer's income tax or PRRT worked out on the basis of their income tax or PRRT return for all other taxpayers.
The base penalty amount can be increased or reduced if there are aggravating or mitigating circumstances, or remitted where it is fair and reasonable to do so.
For more information, see MT 2008/2 Shortfall penalties: administrative penalty for taking a position that is not reasonably arguable.
Penalty for failing to make a statement
A SGE is liable for a penalty of 150% of the tax-related liability if both of the following apply:
- the entity fails to lodge a document necessary to establish its tax-related liability
- in the absence of that document, we determine the entity's tax-related liability.
This penalty will apply if, for example, the entity fails to lodge a tax return and we determine the entity's income tax liability by other methods.
The base penalty amount can be increased in some instances, or remitted where it is fair and reasonable to do so.
Scheme penalties
Administrative penalties are doubled for a SGE that enters into tax avoidance and profit shifting schemes, unless they have a reasonably arguable position.
These doubled scheme penalties apply from:
- 1 July 2020 for entities satisfying the updated SGE definition per Treasury Laws Amendment (2020 Measures No. 1) Act 2020
- 1 July 2015 for all other SGEs.
Failure to lodge on time penalty
The FTL on time base penalty amount is multiplied by 500 where the entity is a SGE. FTL penalties apply when they do not lodge an approved form by its due date. Examples of approved forms include:
- income tax returns
- activity statements and GST annual returns
- fringe benefits tax returns
- country-by-country (CBC) reporting statements
- general purpose financial statements
- Single Touch Payroll reports
- PAYG payment summary annual reports
- taxable payments annual reports.
These increased FTL penalties apply to approved forms due on or after:
- 5 December 2019 for a SGE subsidiary member of a consolidated group or a MEC group
- 1 July 2020 for entities satisfying the updated SGE definition per Treasury Laws Amendment (2020 Measures No. 1) Act 2020
- 1 July 2017 for all other SGEs.
Approved forms that are discretionary, such as voluntary disclosures or objection requests, cannot have FTL penalties applied.
|
Days late |
SGE penalties |
|---|---|
|
28 or less |
$165,000 |
|
29 to 56 |
$330,000 |
|
57 to 84 |
$495,000 |
|
85 to 112 |
$660,000 |
|
More than 112 |
$825,000 |
Before applying FTL penalties
We may issue a warning or reminder before we impose a FTL penalty. However, this is not required under the law. Not receiving a warning or reminder from us is not grounds for non-imposition or remission of an FTL penalty.
SGEs should be extra vigilant to have processes in place to ensure all lodgments are made on time to avoid the application of FTL penalties.
Avoid penalties
To avoid penalties, SGEs should:
- understand their reporting obligations
- lodge their approved forms on time.
A SGE is required to complete the relevant SGE label in their annual income tax return. This applies to the company, trust, partnership and fund income tax returns.
A SGE needs to determine whether it may also be a CBC (country-by-country) reporting entity. CBC reporting entities are a subset of the SGE population, and may have additional lodgment obligations. Entities that are also CBC reporting entities may have:
- an obligation to lodge CBC reporting statements
- an obligation to lodge a general purpose financial statement if they are a corporate tax entity.
A SGE that takes reasonable care with their tax obligations will not incur a false or misleading statement penalty.
Where we have imposed administrative statement penalties, scheme penalties or FTL penalties, a SGE will have the opportunity to seek a remission of the penalty.
Lodgment deferrals
If a SGE is unable to meet lodgment deadlines due to exceptional and unforeseen circumstances, they can request a deferral.
Entities should request a lodgment deferral as soon as practicable once they believe they cannot meet a due date. If they lodge after the deferred due date, it will be considered a failure to lodge on time and penalties may be applied.
Safe harbour
Safe harbour provisions aim to ensure that services provided to the public by registered tax agents and BAS agents are of an appropriate ethical and professional standard. In certain circumstances, a client of a registered tax agent or BAS agent will not be liable to certain administrative penalties.
Automatic Exchange of Information
Penalties applied to Automatic Exchange of Information reporting requirements are increased for SGEs. These reporting requirements include:
- Common Reporting Standard
- Foreign Account Tax Compliance Act.
Both reports contain statements required to be lodged in an approved form.
Practice statements
The following practice statements provide guidance on our administrative practice for the imposition and remission of penalties to which the increases for SGEs apply:
- MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard
- MT 2008/2 Shortfall penalties: administrative penalty for taking a position that is not reasonably arguable
- PS LA 2011/19 Administration of the penalty for failure to lodge on time
- PS LA 2011/30 Remission of administrative penalties relating to schemes imposed by subsection 284-145(1) of Schedule 1 to the Taxation Administration Act 1953
- PS LA 2012/5 Administration of the false or misleading statement penalty – where there is a shortfall amount
- PS LA 2012/4 Administration of the false or misleading statement penalty – where there is no shortfall amount
- PS LA 2014/2 Administration of transfer pricing penalties for income years commencing on or after 29 June 2013
- PS LA 2014/4 Default assessment penalty.
More information
If you have any questions related to SGE penalties, email us at SGE@ato.gov.au.
For information on law changes that impact the application of SGE penalties, see:
- Treasury Laws Amendment (2019 Measures No. 3) Act 2020External Link (Application of penalties to subsidiary entities)
- Treasury Laws Amendment (2020 Measures No. 1) Act 2020External Link (Transitional penalty provisions for entities that meet the expanded SGE definition.