Stressing about an Overdue Tax Return? Or maybe a couple of late tax returns that you're running from?
We understand what you’re going through.
It’s probably been keeping you up for months, if not years. If you want to make yourself feel better ATO’s assistant commissioner Kath Anderson shared some of the funny, weird and crazy justifications people have used to try and avoid penalties for being late with their tax return. Some ranged from “My paperwork flew out the car window when I was on my way to see the accountant” to “my ex-wife burnt everything belonging to me, including all of my tax records”.
We’ve seen it all, you’ve been too busy taking care of business or maybe it just looked too complicated.
Whatever your reasons for being behind on lodging, it’s always better to get it done now than later.
We’ve created this resource to help you mentally prepare for your tax cleanups and late lodgments.
You’ll find answers to the questions you’ve silently asked about late lodgments, the next steps to take so that you finally get better sleep.
What happens now that I haven't lodged my tax return?
If you’ve already missed the deadline, you’ve likely attracted a late lodgment penalty.
The ATO generally tries to make the process smooth for late lodgers that have a good lodging history.
The good news is that the ATO is full of real people and they understand that sometimes you’re affected by things beyond your control such as falling sick or being hit by a natural disaster/pandemic.
If this is the case for you, then you can apply or have your accountant apply, to have the penalty or interest charges taken away.
But IF you just got too busy to lodge, there might be penalties that apply. The amount changes from time to time so don’t listen to your pals. Check with the ATO.
Before you panic, this amount can be smaller than you think AND the ATO want to work with you to get it paid so often offer repayment plans.
Yes, even if you’re embarrassingly overdue by years a good accountant can help you work towards a very agreeable plan for catching up.
But I can't afford to pay my overdue taxes?
Believe it or not, you’re not the only one.
We recently assisted a client who owns a plumbing business with the same dilemma.
They had been holding back from paying since 2005 because the process seemed complicated.
That’s 16 years of unpaid taxes!
But after our accountants walked them through the process, they are now more than halfway done paying their dues.
It’s best to start today than later (aka don’t wait for 16yrs). If you might be late for your payments for one reason or the other, the ATO appreciates being notified about it. As the saying goes “Communication is king”.
This lets them know that your intentions are right but you have a few setbacks.
Don’t wait any longer, it’ll get much more difficult to catch up, sometimes we all just need to put our “Grow up pants on” and face the music, being late on your taxes does not make you a bad person, it does not make your business any less, it's just late, that’s all.
Will I get prosecuted now that I'm late on lodging a tax return?
It can happen, a good accountant can be a great advocate on your behalf to try and stop a fine or limit the amount but depending on the circumstances it’s possible.
This usually happens when you have not communicated your setbacks and intentions to pay and ignoring reminders and communications so the more you ignore the worse it can be.
What are the worst-case scenarios the ATO might take against my business?
In most cases, businesses are usually behind on lodging for the current or previous year.
This can attract the following actions from the ATO:
- Debt collection agencies may be involved to collect unpaid debts
- ATO may decide to audit or review your business
- You may have to pay interest charges. An example is the Late Payment Interest (LPI) or the General Interest Charge (GIC)
- Two or more years of tax payable may be due at one point
On a personal note...
That property or asset you’ve been planning on buying? You’re not securing the loan for it.
They’ll ask for your latest tax information or charge a ridiculously high interest rate.
Why? You’re a HIGH risk to them.
You’re also likely to lose out on other service benefits like family tax benefits, childcare rebates and Centrelink payments.
As a business owner or contractor, you’ll have struggles budgeting, managing your cash flow and even planning a safe financial future. This is because you’ll need a current record of your earnings and expected tax expenses.
Making sure that you lodge on time gets you on the ATO’s good side plus it’s a perfect opportunity to plan, grow and protect your future dollars.
"I'm behind on lodgment. What do I do now?
Step One: Know Where You Stand
Firstly, understand that you’re not the only one!
It’s never too late to sort out your position and get things going again.
We encourage working with a tax agent. Registered tax agents have a better reach to existing tax records through the tax agent portal.
Give us two minutes and we can view your outstanding returns (those post-2001) and we’ll help you know where you’re at.
Step Two: Get That Paperwork Ready!
This part needs you and your tax agent to work together to bring you up-to-date.
You’ll need to gather up important documents, records and other relevant information. These include:
- Bank Statements
- Deduction records/receipts (if any are available)
- Dividend/Investment income records
- PAYG summaries from your employers
- Private health insurance information
- Centrelink payment information
- HELP/HECS balances
If you can’t get to all of it, no worries. Your registered tax agent will be able to access some of it from previous years and through the ATO portal. If there are any deductions that you can claim, your tax agent will let you know.
Step Three: Lodging!
Yes, even if the deadline has passed. Lodge as soon as you can, anyway. Your three options here are through a registered tax agent, you can do it online or lodge a paper tax return. If you haven’t lodged for far too long (months or years) it would be best to bring in a tax agent. This is because they have special schedules that cater for clients lodging later than the set date for lodgments.
We’ve been helping our trade clients clean up late lodgments and secure those loans where required.
We’re also a registered tax agent so we can help you lessen the risk by lodging a late tax return on your behalf so get in contact with us right now and get started on catching up on your tax.