ATO Fines to Increase

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Businesses that fall behind on their tax lodgements can expect the financial penalties to increase dramatically from January 1, 2023, with more rises to follow.

Buried in the Federal Budget was a scheduled increase to Commonwealth Penalty Units from the current level of $222 to $275 at the start of 2023. Commonwealth Penalty Units dictate the value of fines for tax, communication, financial and fraudulent offences.

For businesses, those penalties can be applied to the following late returns, reports, and statements:

Fines To Increase
  • Activity statements​
  • Tax Returns
  • FBT Returns
  • PAYG Withholding Annual Reports
  • Single Touch Payroll Reports
  • Annual GST Returns and Information Reports
  • Taxable Payment Annual Reports.

Small entities can expect to pay one penalty unit for each 28-day period that their tax return or statement is overdue, up to a maximum of five penalty units. In effect, the increased financial value of Commonwealth Penalty Units means a maximum fine could become $265 more expensive at the end of this year.

Medium-sized employers for PAYG withholding purposes, or those with assessable income or current GST turnover of more than $1 million and less than $20 million, can expect those penalties to be multiplied by two. Even greater penalties are expected in the future, as the budget papers note the amount will increase every three years in line with Consumer Price Index (CPI) growth. The next indexation is scheduled for July 1, 2023 and the Reserve Bank of Australia estimates CPI will grow 6.25% over the year to June 2023, driving the cost of late payments even higher.

Despite the increasing compliance activities, taxpaying businesses with extenuating circumstances can still apply for a penalty remission.

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