Remission of penalties
Tax laws authorise the ATO to impose administrative penalties for a range of conduct, including not taking reasonable care in claiming a deduction to which you are not entitled or making a false or misleading statement.
The purpose of the penalty provisions is to encourage taxpayers to take reasonable care in complying with their obligations.
The law specifies the conditions making you liable to a penalty and the amount of the penalty. However, we have discretion to reduce (remit) the penalty amount according to individual circumstances, so we frequently remit a penalty before advising you of your tax debt.
If you're dissatisfied with a penalty imposed on you, you may, in most cases, ask us to remit it. You can also object to some penalties through the objection process.
How to request a remission of penalty
You can ask for a reduction or cancellation of any penalty (referred to as partial or full remission), including penalties for failing to:
- lodge documents on time
- withhold amounts as required (PAYG withholding system)
- meet other tax obligations.
You can make your request:
- through the online Business or Tax Agent portals (you must be registered)
- by phone (for small penalties and simple cases)
- by fax or mail to the address given in the letter advising you of the penalty.
For large penalties, or complicated cases, we recommend you write to us. In some circumstances, we may ask you to put your request in writing.
When requesting a review of a penalty, include the following information:
- your full name
- the name, postal address and daytime phone number (if convenient) of a person we can contact about this request
- your tax file number (TFN) or Australian business number (ABN)
- the reference number from the letter advising you of our decision
- the reasons you think it is fair and reasonable for us to remit the penalty in your situation.
Disputing a penalty through the objection process
For the following penalties you can't request a remission, you must object to the penalty instead:
- a tax shortfall
- a false or misleading statement (in a tax return, business activity statement, fuel scheme claim form or super statement – including member contribution statement, lost member statement and departing Australia superannuation payment report).
For more information regarding penalty units refer to the Payment, interest and penalties webpage on ato.gov.au
How we assess a request for reduction
A key principle for us is that taxpayers who under-report their income, over-claim their credits or delay paying their tax should not gain an advantage over taxpayers who do the right thing.
In deciding whether to remit a penalty we also consider:
- your compliance history
- whether tax was deferred or avoided
- the reasons for the increased tax (or reduced credits) that brought about the imposition of penalties
- whether we became aware of the tax shortfall as a result of your voluntary disclosure or our compliance efforts
- your attitude towards complying with the tax laws.
We encourage taxpayers with a good compliance history to remain compliant by treating them more leniently than taxpayers who don't have a good compliance history.
A good compliance history does not mean you won't have to pay a penalty if you have a shortfall amount. It means we consider all the relevant circumstances, including your compliance history, when deciding whether it is fair and reasonable to remit the penalty in full or in part.
The weight we give to compliance history varies depending on the circumstances. If a taxpayer has behaved recklessly or with intentional disregard for the law, a good compliance history is less likely to influence our decision. Similarly, if a taxpayer has a history of non-compliance, they would generally need to provide clear evidence that the imposition of a penalty would be unjust before we would remit any penalty amount.
A good compliance history is generally one where you:
- have met all your lodgement obligations on time (including lodging activity statements and income tax returns)
- have paid all non-disputed debt (or have a payment arrangement)
- haven't recently been liable for a penalty.
Tax deferred or avoided
If a tax debt was paid late (deferred) rather than permanently avoided, there may be scope to remit the penalty in full or in part. The level of remission would be influenced by the period of deferral and any tax avoided as a result of the deferral.
For example, a taxpayer may account for their GST on the wrong activity statement (that is, in the wrong period). After the amendments, if there is no shortfall amount in overall terms, the penalty may be remitted in full.
Similarly, if a deduction or credit is claimed in the wrong taxpayer's return or activity statement but there is no shortfall amount in overall terms, a penalty may be remitted in full. If the two taxpayers have different tax rates there will be different shortfall amounts for each taxpayer and a net overall shortfall amount. Where this happens the penalty may be remitted so that it equals the penalty that would be applied to the net overall shortfall.
How we advise you of our decision
If we don't remit the penalty amount in full, we give you a written explanation of our decision.
Further action you can take
If you have objected to a penalty and are dissatisfied with our decision on your objection, you can seek an external review of our decision through the Administrative Appeals Tribunal or the Federal Court of Australia.
The tax laws authorise the ATO to impose administrative penalties for conduct such as not taking reasonable care in claiming a deduction to which you are not entitled or making a false or misleading statement. If you're dissatisfied with a penalty, you can generally ask us to reduce or cancel it. You can also object to some penalties through the objection process.