A failure to lodge notice is a communication issued by the ATO (Australian Taxation Office).
FTL notices are issued to those who are obligated to lodge a return, statement or report by a particular date but fail to do so.
Australians who fail to lodge their tax return on time could face a fine.
Failing to lodge a tax return can also be a cause for prosecution by the Australian Taxation Office.
However, failing to meet the obligations of a lodgement on time doesn’t always result in penalties or fines.
The ATO usually takes personal circumstances into account before deciding upon any follow-up action.
Why would I receive a failure to lodge notice?
If your tax return has not been lodged with the ATO by the agreed date, you will receive a warning, either in writing or on the phone, that your tax return has not been received.
FTL notices and penalties can be applied to the following lodgements:
Penalty for failure to lodge activity statement on time
Single Touch Payroll reports
PAYG withholding annual reports
Annual GST returns and information reports
Taxable payment annual reports
Additional manual penalties may also be incurred if taxpayers ignore lodgement requests.
These manual penalties are usually applied in situations of non-compliance – for example, if a taxpayer has refused to lodge after multiple requests to do so.
How is a failure to lodge (FTL) penalty calculated?
FTL penalties can vary depending on the size of the entity, and the length of time that has passed after the lodgement due date.
Penalties can be calculated as follows:
ATO failure to lodge penalty for small entities
FTL penalties for small entities are calculated at the rate of a single penalty unit for each 28-day period (or part thereof) that the statement is overdue.
The penalty can be applied up to a maximum of five penalty units.
What is FTL (failure to lodge notice) penalty for medium entities?
For medium entities, the penalty unit which applies to small entities is multiplied by two.
Medium entities are defined as medium withholders for PAYG, or entities which have an assessable income or GST turnover of greater than $1 million but less than $20 million.
What is FTL (failure to lodge notice) penalty for significant entities
Penalties for significant global entities are multiplied by 500.
Such penalties have applied since 1 July 2017 to significant entities which have failed to lodge an approved form on a given date.
What is FTL (failure to lodge notice) for nil result/refund-level statements
In general, penalties are not applied to late-lodged tax returns, FBT returns, activity statements or annual GST returns if the lodgement results in a refund to the taxpayer or a nil result.
It is often the case that businesses which were formed but never fully started have nothing to declare on their return, or in other instances may have operated at a loss – hence the leniency of penalties for late returns in these circumstances.
Can you request remission for FTL penalties?
Taxpayers can avoid or reduce penalties by requesting a failure to lodge penalty remission. There are two types of remission:
1. In full.
2. In part, if there are extenuating or exceptional circumstances – for example, if the failure to lodge was due to serious illness or a natural disaster.
Taxpayers are only able to request a failure to lodge penalty remission once their outstanding statements or returns have been submitted.
The ATO has the discretion to reduce or remit the penalty depending on individual circumstances.
FAQs about FTL penalties
The following are some of our most frequently asked questions surrounding ATO failure to lodge penalty notices.
Prior to reading this article, you may have been wondering “what is FTL (failure to lodge notice)?”
This information should help you understand in further detail:
Can you lodge overdue tax returns?
Overdue tax returns can be lodged, although taxpayers who submit late returns may incur a failure to lodge penalty.
The penalty charge can vary depending on the size of the entity, and how overdue the tax return submission was.
Does ATO debt affect credit rating?
Taxpayers and businesses with ATO debts should be aware that the ATO can disclose the details of tax debts to credit reference agencies.
This could potentially affect the ability of an individual or business to obtain credit in the future.
How long do you have to pay ATO debt?
If you’re struggling to meet your ATO debts, it may be possible to set up a payment plan.
ATO payment plans generally last no longer than two years, although longer payment terms can be negotiated in exceptional circumstances.
Can you go to jail for not paying tax in Australia?
Failure to disclose information in your tax return or willfully refusing to submit a tax return could be considered tax evasion.
In Australia, tax evasion is criminalised by Federal and State governments.
Have you been charged an FTL penalty?
If you’ve been charged with a failure to lodge a penalty, the important thing is not to panic. Many people fail to submit their tax returns on time for many different reasons.
Remain calm, and be open to communicating with ATO to explain why your return is late.
You should also be prepared to do what it takes to rectify the issue and potentially face a small penalty charge.
To avoid lodging a late tax return, Pherrus can arrange to perform bookkeeping, accountancy and the submission of tax documents on your behalf. For further information, please do not hesitate to contact us today.
A member of our friendly and experienced team will be happy to discuss your issues and offer a practical solution which could even help save you money.