How to avoid a Tax Return Penalty

Tax Penalties are not a myth!

All tax returns have a due date and receiving a penalty for filing taxes late is not uncommon. You can also receive a penalty for paying taxes late also. You may have lodged your return on time but a fine in the form of interest may occur if your payment is not received within 21 days of the tax deadline.

If you know you won’t be able to lodge your return on time or pay your taxes and you have a legitimate reason, you can discuss this with the ATO. Provided you have good tax lodgment history and no outstanding returns you can obtain an extension for lodgment or payment to avoid late filing penalties and late payment penalties.

Penalties for not filing taxes or late tax returns

The Australian Taxation Office (ATO) can issue you a penalty for not filing taxes. This tax penalty comes in the form of a single fee which you must pay within the given time frame. If you do not pay tax penalties within the given 21 days, you will incur interest on this amount until it is paid in full. This interest is known as a General Interest Charge (GIC) which is charged at a rate of 11.86% per annum.

In most circumstances, the ATO will issue a warning and give you a timeframe to lodge your outstanding return and if not done so by the date outlined you will receive a late tax return penalty.

The table below shows the potential tax penalties that you could be issued depending on how late your returns are:

Days Past Due Date:

Tax Penalty Amount:

1-28 days


2 months


3 months


4 months


More than 4 months



Penalties for paying taxes and penalties late

The ATO grants an individual 21 days to pay any tax debts they may owe. As soon as an outstanding amount remains outstanding after its due date penalties will occur. These late tax payment penalties come in the form of a General Interest Charge (GIC). GIC is charged at a rate of 11.86% per annum and will continue to incur until the entire outstanding amount is paid.

When you complete your latest tax return and you still have tax payable from the previous year, this will be offset against any amounts owed to the ATO. Many individuals wonder why their tax return resulted in a refund however they did not receive any or as much as their tax return outlined. This is usually due to the fact they had money on their Income Tax Account that they owed to the ATO.

If you have tax return penalties and outstanding debt you owe to the ATO, GIC will incur on both of these amounts until they are paid in full. GIC is compounded so the longer you leave it, the most interest you will incur and eventually have to pay to the ATO. 



Avoid a Penalty and Complete Your Tax Return Now