Penalties and Offences

Penalties and Offences

Shortfall amounts

A shortfall amount arises where the tax liability is less than it would have been if the statement had not:

Been false or misleading,
Treated an income tax law as applying in a way that was not reasonably arguable,
Disregarded a private ruling applicable to the taxpayer

Tax Shortfall Penalties

A penalty may apply where a taxpayer makes a statement (or fails to make a statement) that results in a "shortfall amount"

i.e. an underpayment of tax

Shortfall Interest Charge (SIC)

On 29 June 2005 the SIC was introduced for amendments of 2004/05 and later years income tax assessments
The SIC replaces the GIC applied to income tax shortfalls for the period before assessments are amended
Generally, the SIC applies from the date due for payment of the earlier, understated assessment until the day before the ATO issues the notice of amended assessment

Shortfall Interest Charge (SIC)

The SIC is calculated daily on a compounding basis and is updated on a quarterly basis.

Late Payment Penalties

A General Interest Charge (GIC) applies to the late payment or underpayment of a range of taxes, the late lodgment of various returns, late payment of penalties or the failure to make deductions and other payments under the PAYG system

Definition

Penalty taxes differ from tax offences in that penalties are imposed by way of additional tax, whilst tax offences are prosecuted by the Courts

Therefore, a taxpayer who fails to comply with provisions of the TAA may be faced with either:

additional penalty tax, or
court prosecution

but not both

Uniform penalty regime

The uniform penalty regime provides for the imposition of penalties:

Relating to statements and schemes
For the late lodgement of returns and other documents
For failing to meet other tax obligations

Shortfall amounts

A shortfall amount is the difference between tax payable in accordance with the law (proper tax) and tax payable based on the taxpayer�s tax return (statement tax)

Tax penalties apply where there is a shortfall amount caused by a particular behaviour of the taxpayer or tax agent

Penalties

Tax Shortfall Penalties

The culpable behaviours which incur shortfall penalties are:

Intentional disregard of tax law
Recklessness
Lack of reasonable care
No reasonably arguable position
Private Ruling disregarded

Late Lodgment Penalties

Taxpayers who fail to lodge tax returns by the due date are liable to a "base penalty amount"

The base penalty amount is one penalty unit for each 28 day period late up to a maximum of 5 penalty units

A penalty unit is valued at $110

The amount of the penalty payable increases according to the size of the entity

Small entity � base penalty amount ($110)
Medium entity � double the base penalty
Large entity � fives times the base penalty