Understanding ATO Remission of Penalties

The Australian Taxation Office (ATO) can impose various penalties on taxpayers for non-compliance, such as failing to lodge documents on time.

However, under the Taxation Administration Act 1958, taxpayers can request a remission of penalties in certain circumstances.

Knowing when and how to apply for remission can save you significant financial hardship and stress.

What is a Remission of Penalties?

Remission of penalties refers to the removal in part or in whole of a penalty that has been imposed.

Administrative penalties are usually applied when a taxpayer fails to meet their obligations, such as late lodgement of returns.

In many cases, these penalties can accumulate interest over time, adding to the taxpayer’s financial burden.

The Australian Government recognises that penalties can sometimes exacerbate financial difficulties, so it allows taxpayers to request a remission if there are reasonable grounds for non-compliance.

Key Grounds for Penalty Remission

The ATO evaluates remission requests on a case-by-case basis.

Some key factors that may justify a remission include:

Circumstances Beyond Your Control

Natural disasters, serious illness, or other events that significantly impact your ability to meet tax obligations may warrant a remission.

Genuine Attempts to Comply

If you made genuine efforts to comply with your tax obligations but encountered issues such as system failures, the ATO may consider remitting penalties.

Voluntary Disclosure

If you voluntarily disclose an error before the ATO becomes aware, this can reduce or eliminate penalties, especially if the disclosure is made promptly.

How to Apply for ATO Remission of Penalties

If you believe you have grounds for a remission, you can request one by lodging an application with the ATO.

When submitting a remission request, you should include:

Detailed reasons for your non-compliance.
Documentation supporting your claim, such as medical certificates, evidence of system issues, or proof of natural disasters.
A clear explanation of what actions you took to rectify the situation once you were able to comply.

The ATO will then review your case and determine whether a full or partial remission is warranted.

In some instances, the ATO may grant a remission automatically, particularly for first-time offenders or if the penalties are small.

Late Lodgement Penalties & Interest Charges

The ATO remission of late lodgement penalty is one of the most commonly sought remissions.

Late lodgement penalties apply when a tax return, activity statement, or other required documentation is lodged after the due date.

These penalties can accumulate quickly, particularly for businesses, and may even attract additional interest through the general interest charge (GIC).

The remission of interest and penalties ATO offers can significantly reduce the financial impact of late lodgements.

However, you must demonstrate that there were genuine reasons for the delay and that steps were taken to lodge the documentation as soon as possible.

Contact Us

While the ATO does offer a clear path for requesting a remission, the process can be complex, and it’s important to provide thorough documentation and valid reasoning.

If you need assistance with the ATO remission of penalty or have questions about other tax-related matters, contact us today for expert advice. We offer a free, no-obligation 15-min consultation for all enquiries.