Although nobody likes to pay tax, it's that time of year again and we all need to dust off our tax receipts and get crunching the numbers.
While everyone is aware that June 30 is the end of the financial year, there is more uncertainty about who needs to lodge an income tax return and when it is due if you do.
For most individuals, you need to lodge an income tax return by the end of October if you have earned income in Australia during the past financial year, otherwise the tax man could come calling. That said, if you miss the deadline it may not be the end of the world.
Meeting the deadline
The official deadline for lodging an income tax return for individuals, sole traders, partnerships and trusts this year is 31 October 2018. This is also the lodgement deadline for super funds.
It may be possible to obtain an extension if you have no prior or existing tax debts, no unlodged or overdue tax returns from previous years, and you have no outstanding Centrelink or Child Support debts.
Under current legislation, the ATO can impose a Failure to Lodge (FTL) penalty if your tax return is not lodged by the due date. Generally, the tax man does not apply penalties immediately on individuals and usually warns you by phone or in writing.
For individuals and small businesses, the ATO will send a penalty notice if it does decides to apply a FLT penalty. The ATO uses a formula of one penalty unit for each period of 28 days a return is overdue, up a maximum of five penalty units. Currently, each penalty unit is $210; double that for medium-sized business and $1,050 for large entities.
The ATO may even remit the interest and penalties charges, depending on your reason for lodging late.
If you find you are unable to pay the debt, all is not lost. The ATO is generally willing to negotiate a payment plan or even release the debt in special circumstances.
No income? You still need to lodge
Even if you have not worked or received any income during a financial year, or have earned less than the tax-free threshold (currently $18,200), most people still need to lodge a Non-Lodgement Advice form with the ATO.
If you are not sure whether you need to lodge a tax return this year, the ATO has an online tool to help you work it out.i
This Non-Lodgement Advice form notifies the ATO that you don't need to lodge a return for the previous financial year. It also ensures you're not listed as having an outstanding return.
Getting some breathing space
Sometimes it's not possible to lodge your tax return by October 31. If that's the case, contact us. You can lodge after the deadline if you are on our books before it rolls around.
For most existing clients the lodgement deadline is 15 May 2019, but if your tax bill last year was $20,000 or more, your return will need to be in by 31 March 2019.
This concession is not a 'get out of jail' card, as failing to lodge a tax return is an offence under the Tax Act. The current maximum penalty is $8,500 or imprisonment for up to 12 months, but charges are usually only laid for severe tax related fraud offences.
It's also worth remembering that lodging late can increase your risk of being reviewed or audited by the ATO.
Missing tax returns
If you have one or more tax returns outstanding, the ATO will eventually take notice and it is usually easier to take steps to get your returns up to date before that happens.
Accountants are happy to help sort things out and assist with filling in gaps in your information from third-parties like banks and employers. We can also work out what you can claim as a deduction and, if you are facing penalties, talk to the ATO on your behalf.
If you have any questions or concerns about later lodgement, please give us a call today.