Penalty Unit Increase: 30 More reasons to Make Sure Your Tax Outcome is Right - 5th June 2017

A piece of legislation that recently made its way through Parliament means that come July 1, misdemeanors committed by errant taxpayers will become a lot more costly.

Penalty units, which are currently pegged at $180 per unit, are set to increase by a little less than 17% (16.6666%) on July 1, 2017. The legislation, the Crimes Amendment (Penalty Unit) Bill 2017 (here's a link to it) increases the dollar value assigned to a penalty unit to $210.

That's a $30 jump in each unit (hence the headline above) but, as with most fines, that's not the whole story, nor the total impost that an incorrect tax return could mean next income year should it put you on the wrong side of your tax obligations. Many penalties are based on a multiple of units, some up to 20 times a unit - therefore $4,200 (more of these are listed below).

Let's also not forget that the penalties issued by the ATO are "administrative". For serious misdemeanors there are also civil and criminal penalties that are imposed by the courts.

Uniform application

One comfort (if that's the word) is that the system of penalties is fairly uniform over most tax laws. Generally this means that a penalty for "failure to lodge" will apply to not lodging a tax return and also not lodging an activity statement.

The penalty provisions relate to certain categories of obligations. These are:

  • positions that are not "reasonably arguable"
  • failing to lodge on time
  • failing to withhold
  • "other" tax obligations
Not lodging a document on time (failure to lodge) gets a penalty unit for every 28 day period it remains un-lodged, up to five periods. The total fine is capped at five penalty units no matter how long the document has been outstanding.

This penalty is however doubled for "medium" sized businesses, multiplied by five for large businesses, and for "significant global entities" (part of a group with a worldwide income of $1 billion or more) the fine is multiplied by 500 (yes, five hundred… more on this measure here).

Multiple units

For failing to meet other tax obligations, there are prescribed unit-based multiples. Other obligations (followed by the penalty for failing to meet those obligations) include, but are not limited to:

  • keeping or retaining records as required (20 penalty units)
  • retaining or producing declarations as required (20 penalty units)
  • providing access and reasonable facilities to authorised tax officers (20 penalty units)
  • applying for or cancelling GST registration when required (20 penalty units)
  • issuing a tax invoice or adjustment note when required (20 penalty units)
  • both principal and agent must not issue tax invoices or adjustment notes in relation to the same taxable supply or adjustment event (20 penalty units)
  • registering as a PAYG withholder when required (five penalty units)
  • lodging an activity statement electronically when required (five penalty units), and
  • paying an amount electronically when required (five penalty units).

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