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Penalty relief

How penalty relief applies to inadvertent errors in tax returns and activity statements.

Last updated 14 June 2023

Eligibility for penalty relief

We understand that people make mistakes. Penalty relief only applies to penalties for inadvertent errors that are due to:

If we find an inadvertent error in your tax return or activity statement, we’ll show you what it is and how to get it right next time and provide penalty relief (not apply the penalty this time).

The aim is to help you get back on track if you have made an inadvertent error.

Penalty relief applies to eligible individuals, and entities with a turnover of less than $10 million. The entities can be:

  • small businesses
  • self-managed super funds (SMSFs)
  • strata title bodies
  • not-for-profit organisations
  • co-operatives.

You aren't eligible for penalty relief if, in the past three years, you have:

  • had penalty relief applied
  • been penalised for reckless or intentional disregard of the law
  • evaded tax or committed fraud
  • been involved in the control or management of another entity which has evaded tax
  • incurred debts without the intention of being able to pay, such as phoenix activity.

How to receive penalty relief

You cannot apply for penalty relief. We will provide it during an audit if it applies to you. Penalty relief will be available once every three years at most.

Penalty relief is applied from 1 July 2018. If we audit you for earlier periods, penalty relief will also apply for those periods.

When penalty relief does not apply

Penalty relief does not apply to other taxes such as fringe benefits tax (FBT) or the super guarantee (SG).

Those not eligible for penalty relief include:

  • wealthy individuals and their businesses
  • associates of wealthy individuals that may be classified as a small business entity in their own right
  • entities that do not meet the small business entity eligibility criteria
  • public groups, significant global entities and associates.