Australia's revenue system relies on taxpayers providing correct information to establish their tax liability under the law and paying the correct amount of tax.
Sometimes taxpayers fail to correctly report an amount they are required to or do not meet other tax obligations. Taxpayers who fail to meet their tax obligations may be liable for penalties and interest charges. When we find an error or omission, we take into account your relevant circumstances, including your compliance history, when deciding what action to take, particularly for any penalties or possible prosecution action. Relevant circumstances include the reasons for the discrepancy or failure to meet a tax obligation and how well you have complied with your tax obligations in the past. We also consider your attitude towards complying with the tax laws.
A penalty is an amount that is calculated using either a statutory formula (for example, most false or misleading statement penalties) or in multiples of a penalty unit. A penalty unit is currently $170. If the penalty is for an offence that occurred before 28 December 2012, the value of a penalty unit is $110.
The types of penalty which apply can be administrative, civil or criminal. Civil and criminal penalties are imposed by courts and administrative penalties are imposed without the need for court action. This guide explains administrative penalties (excluding scheme penalties).
Interest charges apply to unpaid amounts, such as shortfall amounts, late payments and tax debts. Interest charges apply whether or not a penalty applies. Having interest charges applied to a shortfall amount does not depend upon, or imply, dishonesty on your part.
An interest charge is worked out daily on a compounding basis on amounts that are unpaid. The interest charge is calculated by applying the interest rate, which is determined quarterly, to the unpaid amount. Interest charges are designed to:
- encourage taxpayers to pay their tax liabilities by the due date
- ensure that taxpayers who do not pay their tax liabilities on time do not get an advantage over those who do pay in full and on time
- compensate the government for the effect of late payments.
You will usually not have an interest charge applied for a shortfall amount if you reasonably rely in good faith on either:
- advice given to you or your agent by us or a statement in a publication approved in writing by us, unless the advice, statement or publication is labelled as non-binding
- our general administrative practice.
Last Modified: Friday, 21 December 2012