The law imposes penalties on trustees for:
- failing to lodge a tax return on time and in the approved form, which includes all applicable schedules
- having a shortfall amount by understating a tax-related liability or over-claiming a credit that is caused by
- making a false or misleading statement
- taking a position that is not reasonably arguable
- making a false or misleading statement in a material particular that does not result in a shortfall amount
- failing to provide a tax return from which the Commissioner can determine a liability
- obtaining a scheme benefit
- failing to keep and produce proper records
- preventing access to premises and documents
- failing to retain or produce declarations.
Penalties may be applied to any false or misleading statement in a material particular, whether the error results in a liability or not. This penalty will not apply where the trustee and their agent, if applicable, has taken reasonable care in making the statement.
For shortfall amounts over $20,000 or 2% of the net income, the taxpayer also needs to have a reasonably arguable position for the statements made in the tax return.
The law makes it clear that, when considering whether a penalty should be imposed, we will consider a taxpayer’s position to be reasonably arguable if it would be concluded in the circumstances that what is argued for is about as likely to be correct as incorrect, or is more likely to be correct than incorrect.
The Commissioner must explain, in writing, the reasons for a penalty and, if remission of a penalty has been considered but not fully granted, the reasons for the decision.
General interest charge
Trustees are liable for the general interest charge (GIC) where they have:
- not paid a tax, penalty or certain other amounts by the due date
- varied their pay as you go (PAYG) instalment amount or rate to less than 85% of the amount or rate that would have covered the trustee's actual liability on business and investment income for the year.
Shortfall interest charge
Where an assessment is amended because the tax payable has increased, the due date for payment of the amended assessment is 21 days after the Commissioner gives the notice increasing the liability. Generally, trustees are liable to pay a shortfall interest charge (SIC), which accrues from the due date for payment of the original assessment to the day before the issue date of the amended notice of assessment on the increase. Trustees will be notified of the amount of SIC and it will be due 21 days after the notice is given. The GIC will apply automatically to any unpaid amount of the amended assessment and the SIC once the due date has passed.
The SIC is calculated at a rate 4% lower than the GIC.