ATO Penalties for Late Lodgement

If a taxpayer fails to comply with statutory reporting obligations by a specified due date, the taxpayer may be liable for a Failure to Lodge (‘FTL’) on time penalty. FTL penalties can apply where returns, notices, statements, or other required documents are lodged after the relevant due date, including:

• Income tax returns;
• Business Activity Statements (BAS);
• PAYG withholding annual reports;
• Fringe Benefits Tax (FBT) returns;
• Annual GST returns and information reports;
• Taxable payment annual reports; and
• Single touch payroll reports.

Will the ATO Automatically Issue a Late Lodgement Penalty?

If you fail to lodge on time, the Australian Taxation Office (‘ATO’) will usually warn you by phone or in writing before they impose an FTL penalty and issue you a Final Notice to Lodge. The ATO usually gives taxpayers an opportunity to rectify late lodgement if they are experiencing extenuating circumstances that prevent lodging on time.

If the ATO decides to apply an FTL penalty, they will usually notify in writing, including the reason for the penalty and the amount of the penalty. The ATO will normally give at least 14 days after they give notice to make the payment.

How to Calculate Failure to Lodge?

The FTL penalty is calculated based on the type and size of the entity, and the length of delay at the time the document was required to be lodged.

The calculation of the FTL penalty is based on penalty units. One penalty unit for every 28 days (or part thereof) for an overdue lodgement, up to a maximum of 5 penalty units. As of 1 July 2026, one penalty unit is $364.

• Small entities: individual and small entities with a turnover under $1 million. The base penalty, which is one penalty unit, applies per 28-day period.
• Medium entities: businesses with a turnover of $1 million to less than $20 million; the base penalty is 2 penalty units per overdue 28-day period.
• Large entities: businesses with a turnover of $20 million or more, the base penalty is 5 penalty units per overdue 28-day period.

Can You Remit, Reduce, or Cancel a Failure to Lodge?

The ATO has the power to remit penalties upon demonstration of circumstances that enliven the statutory discretion to remit.

The ATO expects taxpayers to lodge any outstanding documents before submitting any remission requests; otherwise, the ATO will not consider a penalty remission application.

Taxpayers must provide the ATO with sufficient evidence to support an application, in particular to demonstrate the circumstances that prevented timely lodgement, how this caused the delay in lodgement, and whether the late lodgement was beyond the taxpayers’ control. The evidence materials may include:

• Doctor certificates detailing the dates of an illness.
• Caregiving-related records to show that a taxpayer was caring for another person who was ill.
• The late lodgement caused by a natural disaster or theft.
• Correspondence and all related evidence from a tax agent, if their acts and/or omissions caused the delay.
• Domestic violence evidence that impacted a taxpayer’s ability to lodge on time.

The ATO will review each case on its own merits, having regard to the specific facts and supporting evidence.

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Related Blog – Failure to Lodge Penalties: ATO Upholds $9k Fine on Dormant Company