SME tax amnesty deadline looms

This article was current at the time of publication.

The Australian Taxation Office (ATO) has confirmed that small businesses with outstanding tax debts originally due between 1 December 2019 and 28 February 2022 must lodge their returns by 31 December 2023 to avoid penalties.

An amnesty on overdue income tax returns, fringe benefits tax returns and business activity statements was announced in the 2023-24 Federal Budget.

The amnesty does not apply to superannuation obligations and excludes other administrative penalties such as penalties associated with the Taxable Payments Reporting System.

To be eligible for the amnesty, a small business must be an entity with an aggregated turnover of less than A$10 million at the time the original lodgement was due.

Eligible small businesses can lodge their eligible overdue forms and the ATO will then proactively remit any associated failure to lodge (FTL) penalties.

COVID catch-up on SME tax

“During the pandemic tax lodgement was not really front of mind for a lot of businesses,” says ATO Assistant Commissioner Sylvia Gallagher.

“However, lodging forms is not optional in Australia, especially lodging these tax forms. So the amnesty provides a really unique opportunity to get back on track penalty free. The amnesty runs from 1 June 2023 with a hard lodgement date of 31 December 2023,” she says.

In a speech delivered to the Tax Institute’s 2023 tax summit in September, the ATO’s Deputy Commissioner of Lodge and Pay, Vivek Chaudhary, noted that small businesses had more than A$33 billion in outstanding debts at that time.

“Businesses appear to be de-prioritising payment of tax and super when they should be provisioning for these bills like they would with any other business expenses,” he said.

“We are hearing more and more from tax professionals that some businesses are waiting for us to contact them, rather than taking early actions to pay.”

Who has paid up?

Gallagher says the ATO has estimated that half a million outstanding lodgements will be obtained before the end of the lodgement amnesty period.

As of 8 September, she says more than 9500 small businesses had taken advantage of the amnesty, with more than 26,500 eligible overdue forms lodged.

“This has equated to more than A$28 million in failure to lodge penalties being remitted so far,” Gallagher says. 

“I would also like to state that some of the lodgements actually haven’t resulted in a debt, they’ve resulted in a credit.

“So those businesses who would have had their credit offset against the failure to lodge penalties will no longer have that, so that credit will go directly to the business.”

Penalty warning

Failure to lodge penalties will be automatically remitted by the ATO after being applied to outstanding debts.

“Businesses or their registered agents may see them for a couple of days, but they will get remitted by the ATO,” Gallagher says. 

“So there’s nothing that businesses or their tax professionals will need to do for failure to lodge penalties.

“This is a really unique opportunity for businesses to get back on track and we want to make sure that lodging these forms puts everyone on a level playing field. It gets those who are not up to date back up to date, so that they can compete fairly with their competitors.

“We do expect businesses to lodge on time and we expect those who can pay to pay. We also expect those businesses to lodge on or before the due date. But if they can't do this, we really want those businesses to get in touch before we get in touch with them.”

If a business has ceased trading, they need to advise their registered tax professional or the ATO directly.

Gallagher notes that there are things the ATO can do to help businesses to get back on track, including payment plans and a variety of other tools at its disposal.

“But I think it’s just really important to state, don’t put your head in the sand. The debt isn’t going to go anywhere. If we know that there are outstanding lodgements, we will take action.”