Practice Statement Law Administration

PS LA 2026/D2

• For information about the status of this draft Practice Statement, see item [4200] on our Advice under development program

Exclamation
                    

This draft Practice Statement explains how to administer penalties that an entity becomes liable to when they fail to comply with their Single Touch Payroll reporting obligations accurately and on time, including the remission of penalties where appropriate.

What this draft Practice Statement is about

1. Entities that make employment-related payments have obligations to report information to us about those payments. This information is required to be reported using Single Touch Payroll (STP).

2. This draft Practice Statement^[1] provides guidance on the administration of penalties these entities may become liable to because of failing to report in a timely and accurate manner through STP.

3. All legislative references in this Practice Statement are to Schedule 1 to the Taxation Administration Act 1953, unless otherwise indicated.

Outline of Single Touch Payroll reporting obligations

4. STP is an event-based reporting framework for entities to provide payroll information to us using Standard Business Reporting (SBR) enabled software.

5. Entities that make relevant related payments, unless exempted^[2], have been required to report through STP since:

•

1 July 2018 for employers that had 20 or more employees on 1 April 2018

•

1 July 2019 for all remaining entities.

6. Section 389-5 requires an entity to notify the Commissioner of:

•

a withholding payment covered by STP

•

the amount (including a nil amount) withheld from that withholding payment

•

a payment that constitutes an employee's ordinary time earnings or salary or wages (within the meaning of the Superannuation Guarantee (Administration) Act 1992 (SGAA))^[3] to the extent they are not covered by the withholding payment

•

a salary sacrificed amount that would have constituted ordinary time earnings or salary and wages if paid directly to an employee.

7. The employment-related withholding payments covered by STP are:

•

a payment of salary, wages, allowance, commissions or bonuses to an employee

•

a payment to a company director

•

a payment to an officeholder^[4]

•

a payment to a religious practitioner

•

a return to work payment

•

an employment termination payment (or payment that would be an employment termination payment except for being received more than 12 months after termination)

•

an unused annual leave or unused long service leave payment

•

parental leave pay

•

a payment to an employee under certain labour mobility programs covered by section 840-906 of the Income Tax Assessment Act 1997 (ITAA 1997).

8. Each time a payment is made (or would have been made if the amount was not sacrificed) is an event which triggers an obligation to report through STP. The reporting must be in the approved form and lodged by the due date.^[5]

9. Entities that do not report as required in a timely and accurate manner may be liable to administrative penalties for:

•

failing to lodge in the approved form by the due date

•

making false or misleading statements.

Voluntary reporting through Single Touch Payroll

10. Entities may also use STP to:

•

notify of reportable employer superannuation contributions (RESC) and reportable fringe benefits amounts (RFBA)^[6]

•

make a finalisation declaration indicating they have used STP to report all information they would otherwise be required to include on a payment summary.^[7]

11. An entity is not liable to administrative penalties for failing to use STP to notify of RESC and RFBA or make a finalisation declaration. However, an entity that chooses to use STP for these and does so inaccurately may be liable to administrative penalties for making a false or misleading statement.

12. Entities that do not use STP to notify of RESC and RFBA or make a finalisation declaration are required to issue a payment summary to a payee and provide a payment summary annual report to the ATO. Administrative penalties for failing to comply with these other obligations are not within scope of this Practice Statement.^[8]

13. An entity may also choose to use STP to notify of certain amounts under child support laws.^[9] Penalties for notifying of child support amounts inaccurately, or failing to report directly to the Child Support Registrar in place of STP reporting, will generally be a matter for Services Australia and are not within the scope of this Practice Statement.

Exemptions from Single Touch Payroll

14. An entity may be granted an exemption from STP reporting, either on a class of entity basis or an individual basis.^[10] An entity that is exempt from STP reporting will:

•

not become liable to administrative penalties for failing to report through STP

•

generally continue to be subject to other reporting obligations covering the same information (such as the requirement to provide payment summaries).

15. Decisions to grant (or refuse) an STP exemption are not within scope of this Practice Statement.^[11]

Importance of timely and accurate reporting

16. The accuracy and timeliness of information reported through STP is critical to the efficient operation of the tax and superannuation systems, and to other programs across the government.

17. Reporting errors also can have severe consequences for individuals who rely on STP reporting, including not having correct information with which to meet their own obligations resulting in their income being incorrectly treated for tax, super or social security purposes, and not ensuring the timely payment of their superannuation entitlements.

18. Information reported using STP is:

•

displayed to individuals through ATO online services

•

pre-filled into individuals' tax returns

•

used to assist in identifying compliance issues, such as payers that fail to meet their pay as you go (PAYG) withholding obligations

•

used in conjunction with superannuation fund member account reporting to identify compliance issues that may affect individuals' super, where employers do not make super guarantee contributions sufficient to avoid liability to the superannuation guarantee charge

•

used to support administration of other government programs including

–

social security programs administered by Services Australia

–

employment programs administered by the Department of Employment and Workplace Relations

–

production of statistics by the Australian Bureau of Statistics.

19. Under the law, the liability for penalties associated with STP reporting applies at an individual payee level – that is, a failure to lodge in the approved form or a false or misleading statement in respect of each payee will potentially attract a separate penalty. This in part reflects the importance of timely and accurate reporting for each individual payee.

20. Accordingly, where the circumstances giving rise to the incorrect or late reporting impact multiple payees in the same way and it is determined a penalty is to apply, the amount of the penalty will reflect this number of payees. It will be particularly important in these cases to consider penalty remission, balancing the impact of the incorrect or late reporting on each individual payee with the circumstances giving rise to the liability.

Process to follow when raising penalties

21. You should follow this 5-step process when you are raising penalties against an entity for failing to comply with their STP reporting obligations:

1.

Determine the type of penalty that is applicable to the circumstances.

2.

Consider whether the law protects the entity from penalties in the circumstances.

3.

Determine the extent and amount of penalty.

4.

Consider penalty remission.

5.

Issue written notice of the penalty.

22. The process is designed to accommodate the principles of this and other relevant practice statements and to ensure entities receive like treatment as much as practicable.

23. You must have collected all relevant information and document the evidence and basis for any penalty decision you make. Examples illustrating this process can be found in Appendix D to this Practice Statement.

Step 1 – determine the type of penalty that is applicable to the circumstances

24. It is important to identify which penalties may apply in the circumstances of a case, as different penalties apply in relation to different behaviour and those penalties have different rules and calculation methods.

Penalties for failure to lodge in the approved form by the due date

25. There are 2 kinds of conduct that can cause an entity to become liable to an administrative penalty for failing to lodge in the approved form by the due date:

•

failing to lodge STP reporting by the due date

•

lodging, but failing to do so in the approved form.

26. STP reporting is in the approved form if, and only if:

•

it is in the form approved in writing by the Commissioner

•

it contains a declaration signed by a person or persons as the form requires^[12]

•

it contains the information that the form requires, and any further information, statement or document as we require, whether in the form or otherwise

•

it is given in the manner that we require.^[13]

27. The approved form for STP reporting may be updated by creating a new version from time to time to account for changes in the:

•

law

•

way we use information reported through STP, or

•

information we require in order to administer tax and super laws.

28. Generally, when a new version of the approved form for STP reporting is created, an entity will be required to begin using the new version unless they have been given approval to remain using the superseded version for a transitional period.

29. An entity that does not begin using the new version of the approved form for their STP reporting and does not have approval to remain using the superseded version (or had approval for a period which has expired) has failed to lodge in the approved form and will be liable to an administrative penalty. This is the case even if they continue to lodge STP reporting using the superseded version.

False or misleading statement penalties

30. An entity is liable to an administrative penalty if they make a statement in their STP reporting that is false or misleading in a material particular.^[14]

31. A statement is false when it is incorrect, or not according to truth or fact.

32. A statement is misleading when it gives the wrong idea or impression.

33. A statement may be either false or misleading because of something included in the statement or because of something omitted from it.

34. For a particular to be 'material', it must have a connection to the purpose for which the statement is made, but it does not have to be something that must or actually will be taken into account in making a decision.

35. The following practice statements provide further information about the meaning of the terms 'false', 'misleading' and 'material particular':

•

Law Administration Practice Statement PS LA 2012/4 Administration of the false or misleading statement penalty – where there is no shortfall amount

•

Law Administration Practice Statement PS LA 2012/5 Administration of the false or misleading statement penalty – where there is a shortfall amount.

36. An entity may make several false or misleading statements in the same document, and an entity is liable to a penalty in relation to each statement. For example, an entity that makes a false or misleading statement relating to each of their 10 employees has made 10 statements and will be liable to 10 administrative penalties.

Step 2 – consider whether the law protects the entity from penalties in the circumstances

37. In limited circumstances, the law protects an entity from the penalties covered in this Practice Statement. You must determine whether these protections apply before proceeding.

Reasonable care

38. An entity will not be liable to a false or misleading statement penalty where they and their agent (if relevant) took reasonable care in connection with making the statement.^[15]

39. When assessing an entity's behaviour in making a statement, you must consider the actions and behaviours at the time the statement was made. Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard provides guidelines for determining whether an entity took reasonable care. While 'reasonable care' is described briefly in this section, you must consult and follow MT 2008/1.

40. The 'reasonable care test' requires an entity to make a reasonable and genuine attempt to comply with obligations imposed under legislative requirements. This means considering actions leading up to the making of the statement.

41. Making a genuine attempt means that the entity was actively engaged with the tax and superannuation systems and actively attempting to comply with their reporting obligations. When considering if a genuine attempt has been made, we compare the entity's attempt with that of other entities in similar circumstances.

42. We are looking for evidence that the entity's attempt to comply is within the standard of care reasonably expected, considering all relevant circumstances.

43. This may mean that, in some circumstances, a higher standard of care may need to be demonstrated. For example, where a significant event occurs (such as transfer to a new payroll system), a higher standard of care would be reasonably expected considering the potential impact of those events to the entity's reporting.

44. The effort required is one commensurate with the entity's circumstances, including their knowledge, education, experience and skill.^[16]

45. The following factors are relevant when assessing reasonable care:

•

if there was an inadvertent mistake

–

if reasonable enquiries were made, including whether the entity conducted a level of enquiry commensurate with the risk of the decision and their resources, or

–

the entity just assumed the statement was correct

•

whether the entity was aware, or should have been aware, of the correct treatment of the law or of the facts, noting an entity

–

should not rely on advice they have received where a reasonable person would be expected to know or strongly suspect the advice is not worthy of such reliance

–

is not obliged or entitled to accept assurance by their professional adviser where statements appear flawed or questionable

•

whether any factors prevented the entity from seeking advice, understanding the requirements of the tax law or reporting correctly, and

•

whether the entity's level of knowledge, understanding of the tax and superannuation systems or circumstances impacted their compliance, considering the

–

entity's level of sophistication relating to STP reporting matters

–

level of knowledge, education, experience and skills of relevant persons involved with the entity

–

governance arrangements and compliance assurance processes of the entity.

Grace periods

46. An entity is not liable to a false or misleading statement penalty if they correct a false or misleading statement made in the course of their STP reporting within a prescribed period. This period is called a grace period.

47. For an entity to be protected from penalties by the grace period, they must:

•

have made the false or misleading statement within the financial year to which it relates^[17]

•

correct the statement, in the approved form, within the periods^[18] shown in Table 1 of this Practice Statement.

48. An entity that corrects a false or misleading statement within the grace period is protected from penalties regardless of whether the false or misleading statement was identified on the entity's own initiative or because we alerted them to the error.

Safe harbours

49. Legislative safe harbours protect an entity from being liable to a penalty because of the actions of their registered tax or BAS agent.

50. In relation to penalties for failing to lodge in the approved form by the due date, the safe harbour^[19] applies where all of the following apply:

•

the entity provided all relevant information to the registered agent to enable the document to be lodged on time (noting that the onus is on the entity to prove that they met this requirement)^[20]

•

the registered agent does not lodge the document on time, and

•

the failure to lodge on time was not due to either

–

intentional disregard of a taxation law by the registered agent, or

–

recklessness by the registered agent as to the operation of a taxation law.

51. In relation to false or misleading statement penalties, each statement must be considered separately and the safe harbour^[21] applies where both of the following apply:

•

the entity gave all the relevant information to the registered agent necessary for the statement to be correctly prepared, and

•

the agent did not act recklessly or with intentional disregard of the law.

52. This means the safe harbour exception applies only where the agent has failed to take reasonable care.

53. Entities that engage the services of third-party payroll service providers are not protected from penalties by the safe harbours for the actions of the payroll service provider unless the third-party payroll service provider is also a registered tax or BAS agent.

54. If you determine that a safe harbour does not apply in the circumstances, you can still consider if the circumstances warrant remission of the penalty.

55. More information to assist you in determining whether a safe harbour is relevant in the circumstances can be found:

•

for penalties for failing to lodge in the approved form by the due date, in Law Administration Practice Statement PS LA 2011/19 Administration of the penalty for failure to lodge on time

•

for false or misleading statement penalties, in PS LA 2012/4 (where there is no shortfall amount) or PS LA 2012/5 (where there is a shortfall amount).

Penalty relief

56. Entities are eligible for relief against penalties for failing to lodge in the approved form by the due date for the first 12 months that the STP regime applied to the class of entities they belong to.^[22]

57. This means you cannot apply a penalty for failing to lodge STP reporting in the approved form for failures that occurred before:

•

1 July 2019 for employers that had 20 or more employees on 1 April 2018

•

1 July 2020 for all other entities.

Step 3 – determine the extent and amount of penalty

58. The key considerations when applying a penalty are:

•

where penalties for failure to lodge in the approved form by the due date are applicable in the circumstances – deciding whether, and to what extent, to apply penalties

•

where false or misleading statement penalties are applicable in the circumstances – deciding whether, and to what extent, to assess penalties

•

calculating the penalty amounts.

59. Appendix A to this Practice Statement covers these considerations in relation to penalties for failure to lodge in the approved form by the due date.

60. Appendix B to this Practice Statement covers these considerations in relation to false or misleading statement penalties.

Step 4 – consider penalty remission

61. Remission allows us to adjust the penalty to match the observed behaviour or particular circumstances of a case, offering administrative flexibility.

62. We have the discretion to remit all or part of the penalty.^[23] Our discretion to remit is unfettered, meaning there's no legal restriction on when we can remit.

63. Remission decisions you make need to balance:

•

the purpose of the penalty regime to encourage entities to take reasonable care in complying with the tax and super obligations and promote consistent treatment between entities in similar circumstances

•

producing a fair, just and proportionate outcome taking into account the entity's circumstances.

64. A remission decision should be made for every penalty decision, even if that decision is that there are no grounds for penalty remission.

65. You must follow the 4-step penalty remission process outlined in Appendix C to this Practice Statement when deciding on remission of penalties relating to the STP reporting obligations covered by this Practice Statement.

Step 5 – issue written notice of the penalty

66. Where a penalty remains payable (for example, because it was not remitted in full), we must send a written notice to the entity that includes^[24]:

•

their liability to pay the penalty, after any reductions or remissions

•

the reasons why they are liable for the penalty

•

if the penalty has not been fully remitted, why it has not been fully remitted.

67. The penalty is payable on the day specified in the notice (which must be at least 14 days after the notice is given).^[25]

Penalties for failing to lodge in the approved form by the due date

68. Notice of the penalty may be given before or after the entity has lodged the relevant STP reporting in the approved form. If it is given before, we can later increase the penalty (up to the statutory maximum) either when the reporting is lodged, or if it remains unlodged.^[26]

False or misleading statement penalties

69. When a penalty is assessed, we must provide reasons for the decisions, detailing the findings on key facts and referring to the evidence or other material facts on which those findings are based. These reasons should be given to the entity along with, or before, the penalty notice. If that's not possible, it should be done as soon as possible after notifying them of the penalty.

More information

70. For more information, see:

•

Miscellaneous Taxation Ruling MT 2008/1 Penalty relating to statements: meaning of reasonable care, recklessness and intentional disregard

•

Miscellaneous Taxation Ruling MT 2012/3 Administrative penalties: voluntary disclosures

•

Law Administration Practice Statement PS LA 2008/3 Provision of advice and guidance by the ATO

•

Law Administration Practice Statement PS LA 2011/15 Lodgment obligations, due dates and deferrals

•

Law Administration Practice Statement PS LA 2011/19 Administration of the penalty for failure to lodge on time

•

Law Administration Practice Statement PS LA 2012/4 Administration of the false or misleading statement penalty – where there is no shortfall amount

•

Law Administration Practice Statement PS LA 2012/5 Administration of the false or misleading statement penalty – where there is a shortfall amount.

APPENDIX A – Applying penalties for failure to lodge in the approved form by the due date

Deciding whether and to what extent a penalty should be applied

71. Overall, you should seek to apply the penalty for failure to lodge in the approved form by the due date in such a way as to improve lodgment behaviours.

72. PS LA 2011/19^[27] outlines that the penalty will be applied if the failure to lodge:

•

places the efficient operation of the taxation and superannuation systems at risk

•

provides a benefit or advantage to the late or non-lodger over the general community, or

•

erodes community confidence in the taxation and superannuation systems.

73. STP reporting is characterised by both its high frequency and the significance it holds for individuals in effectively managing their tax and super affairs. Where this reporting is not lodged in the approved form by the due date, it may be viewed as undermining the efficient functioning of Australia's tax and superannuation systems and may diminish public confidence in its integrity. Accordingly, you generally should decide to apply a penalty if an entity is liable to it – noting that it may be remitted (see paragraphs 61 to 65 and Appendix C to this Practice Statement).

74. However, it may be appropriate to decide not to apply a penalty in some circumstances, taking into account:

•

the compliance history of the entity

•

the effort it took to obtain lodgment

•

the value of the information to be disclosed in the taxation document

•

whether the entity is aware of their lodgment obligation and the consequences of not meeting that obligation

•

whether the entity has had an opportunity to comply

•

the length of time the taxation document was overdue

•

any contact the entity or their representative may have had with us prior to the due date for lodgment.

This list is not exhaustive.

75. For example, it may be appropriate to decide not to apply a penalty where an entity has failed to lodge in the approved form by the due date and:

•

the reporting has now been lodged with minimal delay

•

you are satisfied that it is an isolated incident

•

the entity has a good compliance history

•

the entity has demonstrated that they have taken steps to prevent the failure occurring again.

76. Where you decide it is appropriate not to apply a penalty, you must document your decision on the taxpayer's account.

Multiple simultaneous failures

77. An entity that is required to report through STP may be required to report multiple events on the same day (for example, because relevant payments have been made to multiple employees on the same day).

78. Each event gives rise to a separate obligation to report, and each event that an entity fails to report as required in the approved form by the due date results in them becoming liable to a penalty.

79. PS LA 2011/19^[28] outlines a general rule that where multiple entities are required to be reported on the same document (such as for a superannuation member contribution statement), multiple penalties equivalent to the number of obligations not lodged can be applied. This principle is particularly important for STP reporting because:

•

Failure to lodge STP reporting affects the ability of each employee about whom information is being reported to manage and meet their own tax obligations.

•

It ensures the level of penalty that may apply reflects the culpability of the entity failing to report – that is, it means an entity that fails to lodge STP reporting about 100 employees may receive a penalty that is larger than an entity that fails to lodge STP reporting about one employee.

80. This section explains how to apply to that general rule in relation to STP reporting.

81. You may apply multiple penalties in relation to related STP reporting obligations that were due on the same day. Where you are making a decision about applying penalties for multiple related obligations that were due on the same day, you should consider whether it is fair and reasonable to do so in totality, taking into account:

•

the entity's compliance history

•

the impact of the failure on the tax and superannuation systems

•

the entity's previous pattern of failing to lodge through STP in the approved form by the due date

•

any prior contact with the entity (or their representative) about their failure to comply with STP obligations

•

whether applying multiple penalties in the circumstances produces an unfair, unjust or disproportionate result.

82. Absence of a prior warning from us to the entity does not prevent you from applying multiple penalties in respect of the STP reporting if it is fair, reasonable and just in the circumstances to do so.

83. However, it will generally not be fair and reasonable to apply multiple penalties in relation to STP reporting that was due on the same day if it is the first time the entity is receiving a penalty for failure to lodge their STP reporting in the approved form by the due date.

84. While you may decide to apply multiple penalties in relation to obligations that were due on the same day, only one penalty applies in relation to each specific obligation. For example, where an entity notifies us of a payment made to an employee and does so after the due date, but also fails to do so in the approved form, only one penalty applies in relation to that notification.

Calculating the penalty for failing to lodge in the approved form by the due date

85. The penalty is calculated in 2 stages^[29]:

•

The base penalty amount (BPA) is calculated.

•

The BPA is increased if the entity size tests are satisfied.

Base penalty amount

86. The BPA is one penalty unit^[30] for every 28 days (or part thereof) after the due date that the entity has failed to lodge in the approved form, up to a maximum of 5 penalty units.^[31]

87. The due dates for STP reporting^[32] are outlined in Table 2 of this Practice Statement.

88. The BPA is calculated from the due date of the relevant STP reporting to the date before it is received in the approved form.

Increasing the base penalty amount

89. The BPA is multiplied by 2 if the entity^[34]:

•

is a medium withholder in the month the STP reporting was due^[35]

•

has an assessable income for the income year in which the STP reporting was due of more than $1 million but less than $20 million, or

•

has a current GST turnover of more than $1 million but less than $20 million in the month the STP reporting was due.

90. The BPA is multiplied by 5 if the entity^[36]:

•

is a large withholder in the month the STP reporting was due^[37],

•

has an assessable income for the income year in which the STP reporting was due of $20 million or more, or

•

has a current GST turnover of $20 million or more in the month the STP reporting was due.

91. The BPA is multiplied by 500 if the entity is a significant global entity (SGE).^[38] An entity is an SGE according to the most recent income tax assessment.^[39]

92. If we do not have current information to apply the entity size tests to determine the size of an entity, you should use their withholder status or assessable income to determine their size, whichever results in the higher penalty.

93. Where it is determined that the penalty amount does not reflect the actual size of the entity, the following actions will occur:

•

The penalty notice will be cancelled.

•

A new notice using the correct rate of penalty and reasons for the imposition and calculation will be provided to the entity.

Appendix B – Assessing penalties for false or misleading statements

Deciding whether, and to what extent, a penalty should be assessed

94. It is not administratively appropriate, nor is it necessary, to consider applying the false or misleading statement penalty to every potentially false or misleading statement.

95. Instead, when deciding whether or not to assess a penalty, you should consider the significance of the false or misleading statement to the integrity of the tax and superannuation systems.

96. For example:

•

A statement by an entity that provides an incorrect date of birth for a payee, where there was otherwise sufficient information to identify the individual it relates to, is unlikely to be significant enough to warrant assessment of a penalty.

•

A statement by an entity that the entirety of a payment was gross pay when in fact it also comprised some allowances (which can have different tax consequences for an individual), is likely to be significant enough to warrant assessment of a penalty.

97. Where you determine that the false or misleading statement does have significance to the integrity of the tax and superannuation systems, you should generally proceed to assess the penalty – noting that it may be remitted (see paragraphs 61 to 65 and Appendix C to this Practice Statement).

Multiple false or misleading statements with a common source

98. The event or transactional nature of STP reporting means that some circumstances, such as systems or process issues, may result in an entity making multiple false or misleading statements of essentially the same nature – a particular may be repeatedly false or misleading in the same way, as a result of each statement having a common source. For example, a mistake in configuring payroll software might result in a pay item being classified incorrectly in STP reporting every time it is paid.

99. Each statement that is false or misleading results in the entity becoming liable to a penalty. For example, if a system issue results in false or misleading reporting about the same particular 5 times, the entity will be liable to 5 penalties.

100. This is an important reflection of the importance STP reporting has to the operation of the tax and super systems because:

•

incorrect STP reporting lodged by an entity can have tax consequences for individuals and this is exacerbated where multiple individuals are affected

•

individuals relying on the information reported through STP may be misled into actions that they were not able to validly take or which have detrimental effects, and

•

it ensures the level of penalty that may apply reflects the culpability of the entity – that is, it means an entity that makes a false or misleading statement 100 times may receive a penalty that is larger than an entity that only does so once.

101. However, where you are making a decision about applying penalties for multiple related statements, you should consider whether it is fair and reasonable to do so in totality, taking into account:

•

the entity's compliance history

•

the impact of the failure on the tax and superannuation systems

•

the entity's previous pattern of accurate reporting through STP

•

any prior contact with the entity (or their representative) about their failure to comply with STP obligations

•

whether applying multiple penalties in the circumstances produces an unfair, unjust or disproportionate result.

102. Absence of a prior warning from us does not prevent you from applying penalties in relation to multiple statements if it is fair, reasonable and just in the circumstances to do so.

Calculating the false or misleading statement penalty

103. To assess the penalty amount:

•

assess the entity's behaviour to determine the amount of the BPA

•

increase or reduce the BPA (or both).

Assessing the entity's behaviour in making the statement

104. When assessing the entity's behaviour in making the statement, we consider the actions and behaviours at the time the statement was made. The guidelines for determining the behaviour are in MT 2008/1. They are described briefly in the remaining paragraphs of this Practice Statement, but you must consult and follow MT 2008/1.

105. Actions and behaviours after the statement are not relevant in working out the BPA.

Failure to take reasonable care

106. Failure to take reasonable care occurs where reasonable care has not been taken in connection with making the statement, but the entity or their agent has not been reckless or intentionally disregarded the law.

Recklessness

107. Recklessness is when an entity behaves far below the standard of care expected of a reasonable person in similar circumstances. It's essentially extreme carelessness. Recklessness means an entity shows a disregard for risks or indifference to consequences that could reasonably be foreseen. However, the entity doesn't need to actually realise the risk for their behaviour to be considered reckless.

Intentional disregard

108. Intentional disregard of the law means more than just being reckless or indifferent to a tax law. The entity must actually know the statement is false. They must understand the relevant legislation, how it applies to their situation, and then choose to ignore the law deliberately.

Amount of the penalty

109. The BPA is calculated by:

•

assessing the entity's behaviour in making the statement

•

reducing the BPA to the extent that the entity applied a taxation law in an accepted way.

110. The initial BPA is based on the assessment of the entity's behaviour and whether or not there is a shortfall amount. A shortfall amount is the amount by which a:

•

tax-related liability is less than it would have been if the statement were not false or misleading, or

•

payment or credit that we must make under a taxation law is more than it would have been if the statement were not false or misleading.

111. While an entity relying on advice we provided is highly likely to have taken reasonable care (and therefore will not be liable to a penalty), even if reasonable care has not been taken the BPA is reduced to the extent that the entity applied the law in an accepted way that agreed with:

•

advice given to them by or on behalf of us

•

our general administrative practice

•

a statement in a publication approved in writing by the Commissioner.

112. Subsection 284-90(1) provides the initial BPA as shown in Table 3 of this Practice Statement^[40]:

113. If the entity is an SGE, the BPA amount is doubled. An entity's status as an SGE must be worked out on the day the statement was made and is based upon the most recent income year for which an income tax assessment has been made for the entity or a determination by us that the entity is an SGE at the date of the statement.

Increasing or reducing the base penalty amount

114. In certain instances, the BPA is increased or reduced, using the following formula:

BPA + [BPA × (increase % − reduction %)]


Increasing the base penalty amount

115. The BPA is increased by 20% where the entity^[41]:

•

prevents or obstructs us from finding out about the false or misleading nature of the statement

•

becomes aware of the false or misleading nature of the statement after the statement is made and does not tell us about it within a reasonable time, or

•

had a BPA worked out for this type of penalty previously, even if the penalty was remitted.

116. The increase is a maximum of 20%, even if more than one of the criteria in paragraph 115 of this Practice Statement applies.

Increasing the base penalty amount – prevent or obstruct

117. Examples of what would constitute preventing or obstructing us would include where the entity, without an acceptable reason:

•

repeatedly defers or fails to keep appointments

•

repeatedly fails to supply information

•

repeatedly fails to respond adequately to reasonable requests for information, such as

–

by not replying to the request for information

–

giving information that is not relevant

–

not addressing all the issues in the request, or

–

supplying inadequate information

•

fails to respond to formal information gathering notices

•

provides incorrect information or fraudulently prepares documents in support of statements (although these may also be further false or misleading statements), or

•

destroys records.

118. You should also note the use of the term 'repeatedly' when considering increases for prevention or obstruction. Simply not replying to a letter or not returning a call does not indicate the entity is taking steps to prevent or obstruct us.^[42] It will also not be obstruction where the incorrect information or the failure to provide information was the result of the taxpayer not understanding the request.

119. We expect that where legal professional privilege (LPP) claims are made, they are made properly.^[43] Claims of LPP will not generally be considered to be obstructive. However, if you discover that claims were unjustified, you should consider if they were made to obstruct us.

Increasing the base penalty amount – previous penalty

120. The BPA is increased by 20% where the entity has a previous penalty of the same type as the penalty being assessed. For false or misleading statements which do not result in a shortfall amount, the previous penalty must also have been for a false or misleading statement which did not result in a shortfall amount.

121. The increase will apply regardless of whether the previous penalty was assessed during a previous interaction, or whether it occurs on the same day. This means that, where you assess multiple penalties of the same type at the same time, the increase will apply to the second and subsequent statements.

122. The order of the statements is determined by the date on which they were made, not the period to which they relate.

Reducing the base penalty amount for voluntary disclosure

123. The BPA can be reduced in certain circumstances where an entity voluntarily discloses the false or misleading statement, if they do so in 'the approved form'.^[44]

124. You must refer to MT 2012/3 when making any decision regarding voluntary disclosure and the rates of penalty reduction applicable in certain situations.^[45]

125. A voluntary disclosure must meet the requirements of the approved form.

126. The approved form sets out a list of the information required for the entity to make that disclosure. This includes an identification of the statement and an explanation of its false or misleading nature.

127. Generally, the actual form and structure used is irrelevant, as long as the entity provides the required information through an acceptable mechanism. You can find full details of the information required and the methods or mechanisms available to make a voluntary disclosure at How to make a voluntary disclosure .

128. In working out if a voluntary disclosure has been made, it is important to recognise that an entity making a genuine attempt to inform us of a mistake may not be fully aware of all the information we require.

129. If the disclosure fails to meet the strict requirements of the approved form, but substantially complies with the requirements, and you can accurately determine the nature of the false or misleading statement from the information provided, the disclosure should be treated as meeting the requirements of the approved form.

130. If additional information is sought on an incomplete disclosure and it is provided within a reasonable time, the original incomplete disclosure should be treated as sufficiently complete.

131. The entity's original disclosure would not be regarded as constituting a voluntary disclosure if the facts or reasonable inferences indicate that the entity supplied incomplete information in an attempt to obstruct or hinder us from identifying the correct information (that is, the false or misleading nature of the statement), particularly where the degree of incompleteness is significant.^[46]

Appendix C – 4-step penalty remission process

Step 1 – consider remission based on the entity's attempt to comply with their obligations

132. Where an entity has not rectified their failure to comply in a manner that protects them from penalties^[47], it is still appropriate to recognise that some remission is warranted for an entity that has attempted to comply compared to an entity that has not.

133. Using Table 4 of this Practice Statement, consider an initial amount of remission based on an entity's attempt to comply with their STP reporting obligations.

Step 2 – consider increasing or reducing the remission based on the entity's compliance history

134. You should consider the entity's compliance history for both their STP reporting obligations and obligations under other taxation laws^[48] for the 3-year period leading up to the earlier of the day before:

•

the entity rectified their failure through lodging in the approved form or correcting a statement that was false or misleading, or

•

we commenced compliance action (either by phone or in writing).

135. Your consideration at this step should focus on the entity's history, not their current failure to meet obligations for which the penalty is being raised. This is because behaviours relating to the current failure (such as obstruction) are already taken into account when determining the BPA. Any additional factors relating to the entity's current failure that were not taken into account earlier can be considered in Step 3 of this remission process.

136. You should evaluate an entity's compliance history by reviewing their ATO records, as well as information supplied by the entity and any other parties.

137. The entity's STP reporting compliance history will be given more weight than their compliance history for other taxation laws. When reviewing compliance history, you should focus on:

•

the number of occasions on which the entity previously failed to lodge STP reporting in the approved form by the due date or on which it has been identified that statements made in STP reporting were false or misleading

•

the degree of the entity's attempt to comply with their STP obligations previously (not including their attempts to comply for the period being considered), and

•

any shift in behaviour by the entity that has been subject to previous compliance activity (this may be demonstrated by an improvement or deterioration in their level of engagement and cooperation with us during the compliance activity).

138. Previous occasions of failing to comply with STP reporting obligations that were identified due to our compliance action will reflect a poorer compliance history than those identified via a voluntary disclosure.

139. Depending on an entity's compliance history, you may provide additional remission or may reduce the level of remission provided by the other steps in this remission process. Generally, the amount of additional remission or reduced remission should not exceed the amounts in Table 5 of this Practice Statement:

140. When considering increasing or reducing the level of remission determined in Step 1, remember that you cannot:

•

remit more than 100% of the penalty amount

•

remit less than 0% of the penalty amount (that is, you can decline to grant any remission but you cannot increase the penalty amount to be higher than the law provides).

141. The following examples illustrate some of the common situations of poor compliance history where a reduction in remission may be appropriate:

•

The entity has demonstrated a history or habit of failing to lodge STP reporting or lodging late.

•

The entity has demonstrated a history or habit of making false or misleading statements in their STP reporting.

•

The entity has previously been subject to compliance activity relating to their STP reporting and has shown no improvement in behaviour.

•

The entity has several outstanding lodgments relating to other tax and super obligations.

•

Evidence indicates that the entity has previously been disingenuous or deceptive with the information disclosed in STP reporting (for example, by deliberately disclosing only some information that obscures the true picture).

142. The following examples illustrate some of the situations where compliance history is considered extremely poor:

•

The entity has repeatedly failed to meet their obligations even after multiple compliance actions by us (for example, where they have been audited more than 3 times previously and were found to have failed to meet their obligations each time).

•

The entity has repeatedly attempted to obstruct or hinder compliance action or provided false or misleading statements during compliance action on multiple occasions.

•

The entity has repeatedly and deliberately failed to meet their obligations (for example, by failing to correct known issues in their systems or processes which affect the correctness of their reporting).

Step 3 – consider any other mitigating or exacerbating factors that may warrant further increasing or reducing the amount of remission

143. You need to consider all other relevant facts and circumstances to ensure any penalty remaining after your remission decision takes the entity's circumstances into account. After considering other relevant facts and circumstances, it may be appropriate to:

•

increase the level of penalty remission (including to full remission)

•

maintain the level of penalty without further remission

•

reduce the level of penalty remission.

144. Where you have already taken into account the degree of the entity's attempt to comply (in Step 1) and the entity's compliance history (in Step 2), you should not consider these circumstances again at Step 3.

145. For example, an entity may be found to have a good compliance history at Step 2 due to there being no previous compliance activity. The fact an entity has not been subject to compliance activity before is not also an 'other mitigating fact or circumstance'.

146. When considering increasing or reducing the level of remission determined in Steps 1 and 2, remember that you cannot:

•

remit more than 100% of the penalty amount

•

remit less than 0% of the penalty amount (that is, you can decline to grant any remission but you cannot increase the penalty amount to be higher than the law provides).

147. A penalty should not be remitted at Step 3 merely because the penalty may be 'relatively small'.

148. A penalty for failing to lodge in the approved form by the due date should generally only be further remitted at this step if the entity has lodged the STP reporting concerned.

Mitigating factors

149. Different mitigating facts or circumstances may warrant different levels of further remission, depending on their significance in contributing to the entity's non-compliance. Where there are multiple mitigating factors present, they should each be considered for remission. The circumstances outlined in this section are examples of mitigating facts or circumstances and are not exhaustive.

150. Mitigating facts or circumstances that only warrant minor further remission (generally not exceeding 10%) include:

•

the facts indicate the entity's failure to comply with their STP reporting obligations arose due to an error or honest mistake

•

you are satisfied that the entity has addressed the issue that led to their failure to comply, or

•

the entity's non-compliance occurred in their first year of operation and you are satisfied the failure to comply was not a deliberate attempt to avoid their STP reporting obligations.

151. Mitigating facts or circumstances that may warrant moderate further remission (generally not exceeding 20%) include:

•

the entity's ability to comply was impacted by the severe ill health of a key employee of the employer

•

the entity did meet a significant proportion of their STP reporting obligations accurately and on time and the failure to comply represents a small portion of their overall obligations for the period under consideration, or

•

the entity misidentified a transaction due to complex legal interpretative issues.

152. Mitigating facts or circumstances that may warrant a larger additional remission (generally not exceeding 50%) include:

•

the malfunction or outage of a key ATO system which the entity can demonstrate caused them to narrowly miss the lodgment due date, or

•

a natural disaster, emergency or other similar event has significantly impacted the entity's ability to comply with their obligations.

153. You must ensure that you are considering mitigating circumstances in the context of the type of penalty that applies in the circumstances, as some mitigating circumstances may have more weight in relation to some penalties compared to others. For example, an outage of a key ATO system may warrant larger additional remission of penalties for failing to lodge on time in the approved form but not warrant additional remission of penalties for making a false or misleading statement, as an ATO system outage has greater effect on an entity's ability to lodge than it does on the correctness of an entity's reporting.

Exacerbating factors

154. In limited cases, there may be exacerbating facts or circumstances which warrant reducing the level of remission determined in Steps 1 and 2. Where there are multiple exacerbating factors present, they should each be considered. The circumstances outlined in this section are examples of exacerbating factors and are not exhaustive.

155. Exacerbating facts or circumstances that may warrant minor reduction in remission level (generally not exceeding 10%) include where the entity:

•

is reasonably expected to have fully understood their STP reporting obligations (for example, where they have previously been subject to compliance activity or have previously received advice from the ATO about how those obligations apply to the payment being considered), or

•

has a demonstrated history of repeated disengagement.

156. Exacerbating factors which may warrant moderate reduction in remission level (generally not exceeding 20%) include where the entity:

•

is related to other entities with a history of not meeting STP reporting obligations (for example, where multiple employer entities are controlled by common directors, or are members of a consolidated group, with demonstrated poor compliance history), or

•

demonstrates unwillingness to assist in efforts to reduce any impact to their employees, or assist their employees to respond to that impact, resulting from the entity's failure to comply.

157. Exacerbating factors which may warrant larger reduction in remission level (generally not exceeding 50%) include where the entity took steps to:

•

deliberately avoid their STP reporting obligations, or

•

prevent or obstruct us from undertaking compliance activity. This is more than just failing to respond to a letter; rather, it may be repeated failure to meet agreed timeframes to supply information without acceptable reason, or deliberately supplying irrelevant, inadequate or misleading information.

Step 4 – consider whether or not the result is fair, just and proportionate in the circumstances

158. After considering the entity's attempt to comply, compliance history and other relevant circumstances to determine a remission level, you must also consider whether the remission level you have determined is a fair, just and proportionate outcome.

159. Where you determine that the level of remission reached by applying Steps 1, 2 and 3 of this process is not a fair, just and proportionate outcome you must consider remitting the penalty (or penalties) further to achieve a fair, just and proportionate outcome. What is a fair, just and proportionate outcome will depend on the particular circumstances of a case.

160. Paragraphs 161 to 169 of this Practice Statement describe some situations that may not result in a fair, just and proportionate outcome. They are not exhaustive and where an unfair, unjust or disproportionate outcome arises in other situations, you must still consider further remission.

Mechanical process of the law

161. In some instances, the mechanical process of the law could result in an unintended or unjust result. In particular, this can arise where the BPA when calculating a false or misleading statement penalty is increased because 2 or more penalties were assessed at the same time. In situations where the entity has not been advised of a previous penalty and the behaviour is not intentional disregard of the law, it is appropriate to consider remitting the penalty to the extent of the amount of the BPA increase.

Penalty is disproportionate to the severity of the failure to comply

162. Situations may arise where relatively small errors receive penalties which are disproportionate to the severity of the failure to comply. For example, penalties for false or misleading statements that do not result in a shortfall amount are based on a fixed number of penalty units, and this may result in penalties applying that are significantly larger than would be the case for a similar false or misleading statement that did result in a shortfall.

163. Where this occurs, it is appropriate to consider remitting the penalty in part, to an amount which is proportionate to the size of the misstatement.

Misalignment between the failure to comply and an entity's significant global entity status

164. An entity (which is not an SGE at the time they fail to lodge in the approved form by the due date, or make a false or misleading statement) may be treated as an SGE on the basis of their last lodged return, default assessment or a determination by us, and have a penalty multiplier used to calculate their penalties.

165. If the entity is able to provide sufficient evidence that they were no longer or likely not an SGE at the time of the failure to comply, remission of the additional penalty would be appropriate.

166. For example, a change in SGE status may have occurred as a result of the Australian entity being sold to a new owner, or the SGE may have divided its group, sold off some parts of its business, demerged, restructured, had their turnover drop significantly or go through some other change which affects their SGE status after the period covered by their last return or default assessment.

Total penalty impact

167. The event-based nature of STP reporting obligations through STP means that entities generally have many discrete obligations to lodge, and in the course of lodging make many discrete statements. As a result, you may be simultaneously considering many instances of an entity being liable to penalties for failing to lodge in the approved form by the due date, making false or misleading statements, or both.

168. In these situations, you must consider whether the total penalties overall produce a fair, just and proportionate outcome in addition to the penalties when considered individually.

169. For example, where an entity is liable to penalties for failing to lodge in the approved form by the due date, the penalty for each individual failure may be reasonable but when totalled across multiple failures being considered simultaneously the overall penalty amount may be so high that it is disproportionate or unfair. In those circumstances, it would be appropriate to remit the penalty to a more fair, just and proportionate level.

Appendix D – Examples

Failure to lodge in the approved form by the due date

Example 1

170. Nitin has one employee, who he pays wages to on Thursdays. However, on one occasion, Nitin fails to lodge his STP reporting about a payment until the following Wednesday. Nitin has not been granted an exemption or deferral of the due date. Nitin engages the services of a registered tax agent for preparing his activity statements, but not in relation to his payroll and STP reporting.

171. A tax officer considering penalties follows the process set out in this Practice Statement.

172. First, they determine the type of penalty which is applicable in the circumstances. Nitin has correctly reported the details of the payment he made to his employee and has done so in the approved form. However, the due date for lodging STP reporting was the day Nitin was required to withhold from the payment, and Nitin failed to lodge by that due date. The penalty that is applicable in the circumstances is a penalty for failing to lodge in the approved form by the due date.

173. Next, the tax officer considers whether the law protects Nitin from this penalty. Reasonable care and grace periods do not apply, as neither protects an entity from penalties for failure to lodge in the approved form by the due date. The safe harbour is not available to Nitin, as he doesn't engage his registered tax agent for STP reporting purposes.

174. The tax officer moves onto Step 3 and considers whether or not to apply a penalty. They consider that it is appropriate to not apply a penalty because:

•

Nitin lodged his STP reporting with only minimal delay and without intervention from us.

•

A review of Nitin's compliance history satisfies the tax officer that this is an isolated incident.

Example 2

175. In 2019, Barbara begins regularly lodging STP reporting when she pays her 10 employees. She ordinarily pays her employees on the 15th day of each month.

176. In 2022, the STP approved form is changed, from STP Phase 1 to STP Phase 2. All entities become required to use STP Phase 2 unless they have been granted approval to continue using STP Phase 1 for a transitional period.

177. Barbara was granted approval to continue using STP Phase 1 for a transitional period expiring on 30 September 2023. However, Barbara does not transition to using STP Phase 2 during that period and continues to lodge her STP reporting using STP Phase 1.

178. Each time Barbara pays her employees on or after 1 October 2023 and reports using STP Phase 1, her STP reporting is not in the approved form.

179. A tax officer considering penalties follows the process set out in this Practice Statement.

180. First, they determine the type of penalty which is applicable in the circumstances. Barbara has correctly reported the details of payments made to her employees and has done so by the due date. However, Barbara has failed to do this using the approved form. The penalty that is applicable in the circumstances is a penalty for failing to lodge in the approved form by the due date.

181. Next, the tax officer considers whether the law protects Barbara from the penalty. Reasonable care and grace periods do not apply, as neither protects an entity from penalties for failure to lodge in the approved form by the due date. Barbara does not engage the services of a registered tax or BAS agent, so the safe harbour provisions are not available to her.

182. The tax officer moves onto Step 3 and considers whether or not to apply a penalty. They consider that is it appropriate to apply a penalty because:

•

Barbara has had ample opportunity to prepare for and begin reporting in the approved form.

•

It is not an isolated failure, with Barbara having made multiple lodgments since 1 October 2023 that were not in the approved form.

183. As STP reporting in respect of each payment made to an employee is a separate lodgment obligation, Barbara is liable to an administrative penalty for failing to lodge in the approved form by the due date in relation to each payment to each of her 10 employees over the period since 1 October 2023. However, as it is the first time Barbara is receiving a penalty for this behaviour, the tax officer decides it would be fair and reasonable to only apply a penalty in relation to a single payment to a single employee on 15 October 2023 rather than all of the multiple penalties Barbara is liable to.

184. The tax officer calculates the amount of the penalty to be applied:

185. First, they calculate the BPA:

•

A penalty is being applied in respect of one STP report which was not lodged in the approved form for more than 113 days after it was due; the BPA is 5 penalty units ($1,565).

•

Next, they determine whether the BPA is increased. Barbara was a small withholder with assessable income less than $1 million for the whole of the 2023–24 year; the BPA is not increased.

186. When applying the penalty, totalling $1,565, the tax officer must consider remission and they do this by following the 4-step penalty remission process in Appendix C to this Practice Statement:

•

First, they consider initial remission based on Barbara's attempt to comply with her obligations. Notwithstanding that Barbara has lodged STP reporting, she has made no attempt to do so in the approved form. The initial remission level is 0%.

•

Second, they consider increasing or reducing the level of remission based on Barbara's compliance history. The tax officer considers that Barbara's compliance history is good, with an otherwise good history in relation to her STP reporting and a good history in relation to other reporting obligations. Remission is increased by 15%.

•

Third, the tax officer considers all other relevant facts and circumstances to determine whether further change to remission level is warranted. They determine that no further remission is warranted as Barbara has not displayed exacerbating behaviours that would warrant reducing the level of remission, but also has not demonstrated any mitigating factors which affected her ability to lodge in the approved form.

•

Finally, the tax officer considers whether the outcome ($1,330 after the 15% remission) is fair, just and proportionate in the circumstances. They consider that the final level of penalty is not so high as to be disproportionate to the severity of Barbara's sustained failure to comply with her STP reporting obligations over an extended period, or unfair. They decide it is appropriate to provide no further remission.

187. The tax officer issues a penalty notice to Barbara which includes her liability to pay a penalty of $1,330, the reasons Barbara is liable to the penalty, and the reasons it was not remitted in full.

188. If, following the penalty, Barbara does not begin to comply with her STP reporting obligations by starting to lodge in the approved form, the penalty will be a relevant factor when future penalties are considered and may support a decision that it is fair and reasonable to apply penalties in relation to a greater number of the overall total obligations Barbara has not met, or that a lower level of remission is warranted.

Example 3

189. BigCorp is a large withholder that pays salary to its 5,000 employees on 5 November 2025. It had 5,000 separate obligations to notify us in relation to these payments that were due on 5 November 2025. BigCorp receives a warning letter about its failure to lodge on 20 February 2026 and ultimately lodged its STP reporting on 26 April 2026.

190. A tax officer considering penalties follows the process set out in this Practice Statement.

191. First, they determine the type of penalty which is applicable in the circumstances. BigCorp has correctly reported the payments made to employees and has done so in the approved form. However, it has not done so by the due date. The penalty that is applicable in the circumstances is a penalty for failing to lodge in the approved form by the due date.

192. Next, the tax officer considers whether the law protects BigCorp from this penalty. Reasonable care and grace periods do not apply, as neither protects an entity from penalties for failure to lodge in the approved form by the due date. As BigCorp does not engage the services of a registered tax or BAS agent, there is also no safe harbour that protects them from the penalty.

193. The tax officer moves onto Step 3 and considers whether or not to apply a penalty.

194. The tax officer considers that the value of the information that BigCorp failed to lodge in the approved form by the due date and the fact that BigCorp did not lodge of their own accord (instead only lodging after contact from the ATO) means it is appropriate to apply penalties in relation to all 5,000 failures (and to consider remission) rather than choosing not to apply a penalty.

195. As STP reporting in relation to each payment to an employee is a separate lodgment obligation, BigCorp is liable to an administrative penalty for failing to lodge in the approved form by the due date in relation to each of the 5,000 payments for which they failed to lodge STP reporting in the approved form by the due date.

196. The tax officer calculates the amount of the penalties to be applied:

•

The BPA is 5 penalty units ($1,650), as BigCorp's STP reporting was overdue by more than 113 days.

•

As BigCorp is a large withholder, the BPA is multiplied by 5.

197. Each penalty amount is $8,250, meaning BigCorp is liable to administrative penalties totalling $41.25 million.

198. When applying the penalties, the tax officer must consider remission and they do this by following the 4-step penalty remission process in Appendix C to this Practice Statement:

•

First, they consider initial remission based on BigCorp's attempt to comply with their obligations. As BigCorp ultimately complied with their obligations insofar as they lodged after initial contact from the ATO but before the start of compliance activity, the initial remission level is 40%.

•

Second, they consider increasing or reducing the level of remission based on BigCorp's compliance history. The tax officer considers that BigCorp's compliance history is poor, with 8 occasions over the previous year on which BigCorp has failed to lodge their STP reporting on time or at all, previous penalties applied for failure to lodge STP reporting and various other documents on time. The tax officer decides reducing remission by 10% is appropriate.

•

Third, the tax officer considers all other relevant facts and circumstances to determine whether further change to remission level is warranted. They determine that increasing the remission level by 5% is appropriate.

–

BigCorp has provided supporting evidence to satisfy the tax officer that the initial failure to lodge was the result of sudden illness of a key payroll processing staff member.

–

However, BigCorp could reasonably be expected to be fully aware of their obligation to report on time (particularly having had previous interactions with the ATO about the timeliness of their STP lodgments) and have sufficient controls to ensure their obligation is met.

•

Finally, the tax officer considers whether the outcome ($26,812,500 after the 35% remission) is fair, just and proportionate in the circumstances. The tax officer decides that penalties of that magnitude produce a disproportionate result which is unreasonable or unfair in the circumstances. The tax officer considers further remission to $5 million (representing overall remission of approximately 88%) is a fair and just outcome that is proportionate to the significant scale of BigCorp's failure to comply with their obligations.

199. The tax officer issues a penalty notice to BigCorp which includes their liability to pay penalties totalling $5 million in respect of 5,000 STP reporting obligations, the reasons BigCorp is liable to the penalty, and the reasons it was not remitted in full.

False or misleading statements

Example 4

200. Bob operates a business with employees, which closes in 2004. He then works for another business as an employee until February 2025 when he starts his own business again.

201. Bob pays amounts to his 4 employees that include several different kinds of allowances. In his STP reporting, Bob combines all of these allowances together with the main salary and wages shown at the label called 'Gross'.

202. Bob does this because that is what he used to do before 2004 when he ran his previous business. He does not check whether reporting requirements have changed by consulting the guidance on STP reporting on our website or seeking other advice.

203. As STP reporting requires allowances to be separately identified, every time Bob lodges STP reporting which combines allowances with the main salary and wages payments at the 'Gross' label, his reporting is not true.

204. It is identified that Bob is reporting this way in October 2025 after Bob is sent a letter in response to high levels of changes to the reported information being made by his employees when lodging their tax returns. At this time, Bob corrects his false statements.

205. A tax officer considering penalties follows the process set out in this Practice Statement.

206. First, they determine the type of penalty which is applicable in the circumstances. Bob has reported the payments made to his employees by the due date and has done so in the approved form. However, Bob has reported information about the payments which is false. The penalty that is applicable in the circumstances is a false or misleading statement penalty.

207. Next, the tax officer considers whether the law protects Bob from this penalty.

•

As Bob did not correct his false statements before 14 July 2025, the grace periods do not apply to protect Bob from a penalty in relation to his STP reporting during the 2024–25 financial year.

•

The grace periods might apply to protect Bob from a penalty in relation to his STP reporting during the 2025–26 financial year if, after he becomes aware of the false nature of his statements, he takes action to correct those statements within the applicable grace period.

•

As Bob does not engage the services of a registered tax or BAS agent, no safe harbour protects him from the penalty.

•

Bob would be protected from the false or misleading statement penalty if he took reasonable care. However, the tax officer consults MT 2008/1 and determines that Bob's indifference to the information required in reporting and failure to seek appropriate and up-to-date advice is not taking reasonable care.

208. The tax officer moves onto Step 3 and considers whether or not to assess a penalty.

209. The tax officer considers the significance of the information to the tax and superannuation systems and the impact to Bob's employees when completing their 2024–25 tax returns that resulted from his failure to report accurately.

210. The tax officer decides it is appropriate to assess a penalty in relation to Bob's 2024–25 STP reporting. However, as it is the first time Bob is being assessed for this type of penalty, they decide that it would be appropriate to assess a penalty in relation to STP reporting for a single payday rather than for every occasion in the 2024–25 financial year that Bob made a false or misleading statement in his STP reporting.

211. As each occasion that Bob reports an amount at Gross in STP reporting that is not true is a separate statement, assessing a penalty in relation to STP reporting for a single payday means Bob is liable to false or misleading statement penalty in relation to each of the 4 false statements (one in relation to each employee) that he made.

212. The tax officer calculates the amount of the penalties to be applied:

•

With Bob having continued to apply practices from his earlier business with indifference to whether the requirements for reporting had changed over time and having failed to make enquiries about the correct way to report, the tax officer assessing the penalty consults MT 2008/1 and determines that Bob's conduct amounts to recklessness as to the operation of a taxation law, meaning the BPA is 40 penalty units.

•

The BPA is increased by 20% in relation to the last 3 false statements, as Bob has had a BPA worked out for the first incorrect report.

213. The penalty amount for the first false or misleading statement is $13,200. For each subsequent false or misleading statement, the penalty amount is $15,840. In total, Bob is liable to administrative penalties totalling $60,720.

214. When assessing the penalties, the tax officer must consider remission and they do this by following the 4-step penalty remission process in Appendix C to this Practice Statement:

•

First, they consider initial remission based on Bob's attempt to comply with their obligations. As Bob corrected his false statements only after the commencement of ATO audit activity, the initial remission level is 25%.

•

Second, they consider increasing or reducing the level of remission based on Bob's compliance history. The tax officer considers that Bob's compliance history is good, with good STP reporting history (notwithstanding the false or misleading statements) in the short time since he has resumed his business and a good history in maintaining his personal tax obligations as an employee over the last 3 years. The tax officer decides it is appropriate to increase the level of remission by 15%.

•

Third, the tax officer considers all other relevant facts and circumstances to determine whether further change to the remission level is warranted. They determine that it is appropriate to increase the level of remission by a further 10%, as Bob's false statements occurred during his first year of operating the new business and he has not previously been required to report through STP.

•

Finally, the tax officer considers whether the outcome ($30,360 after 50% remission) is fair, just and proportionate in the circumstances. The tax officer considers that this outcome would be disproportionate and unfair to Bob, given his inexperience, genuine (albeit incorrect) attempts to lodge truthfully, and the fact that the total amounts of payments to employees overall were reported correctly (minimising the impact to those employees when managing their own affairs) despite the incorrect particularisation. The tax officer also acknowledges that multiple penalties were assessed at the same time. Overall, the tax officer determines it would be appropriate to

–

remit the 20% increase in BPA in relation to the latter 3 false statements, and

–

increase the overall remission level to 95%.

215. The tax officer issues a penalty notice to Bob which includes his liability to pay penalties totalling $3,036 in respect of 4 false statements, the reasons Bob is liable to the penalty, and the reasons it was not remitted in full.

Example 5

216. MediumCo is having financial difficulty and is unable to pay its employees' super. In an attempt to avoid detection, MediumCo deliberately and incorrectly includes in its STP reporting on 23 June 2025 that it has a super liability of nil for each employee. This is not the first time MediumCo has run into trouble and they have previously been liable to administrative penalties relating to false statements they have made.

217. The incorrect reporting is detected by the ATO during an audit into MediumCo's super guarantee affairs, and MediumCo does not correct their reporting.

218. A tax officer considering penalties follows the process set out in this Practice Statement.

219. First, they determine the type of penalty which is applicable in the circumstances. MediumCo reported information about the payments made to their employees by the due date and in the approved form. However, by reporting that they had no super liability when that was not true, MediumCo has made a false statement. The penalty that is applicable in the circumstances is a false or misleading statement penalty.

220. Next, the tax officer considers whether the law protects MediumCo from this penalty. Grace periods do not apply, as MediumCo has not corrected its reporting. As MediumCo does not engage the services of a registered tax or BAS agent for their STP reporting, no safe harbour protects them from the penalty. MediumCo would be protected from the false or misleading statement penalty if they took reasonable care; however, deliberately reporting false information is not taking reasonable care.

221. The tax officer moves onto Step 3 and considers whether or not to assess a penalty.

222. The tax officer considers that the significance of the information to the tax and superannuation systems, the impact to individuals, and the deliberate nature of the false statements means it is appropriate to assess a penalty in relation to each false or misleading statement.

223. Each time MediumCo makes a false statement that they have a nil super liability for an employee, that is a separate statement. Making a statement of that nature for each of their 500 employees means MediumCo has made 500 false statements.

224. The tax officer calculates the amount of the penalties to be applied:

•

The tax officer assessing the penalty consults MT 2008/1 and determines that MediumCo's conduct amounts to intentional disregard of a taxation law, meaning the BPA is 60 penalty units

•

The BPA is increased by 20% in relation to all false or misleading statements, as MediumCo has previously been assessed to penalties for false or misleading statements.

225. Each penalty amount is $23,760. A penalty for each of the 500 false statements means that MediumCo would be liable to total administrative penalties of $11.88 million.

226. When assessing the penalties, the tax officer must consider remission and they do this by following the 4-step penalty remission process in Appendix C to this Practice Statement:

•

First, they consider initial remission based on MediumCo's attempt to comply with their obligations. As MediumCo made no attempt to comply with their obligations by correcting their false statements, the initial remission level is 0%.

•

Second, they consider increasing or reducing the level of remission based on MediumCo's compliance history. The tax officer considers that MediumCo's compliance history is poor, with several instances of failing to meet their obligations and of receiving penalties for their failure to comply over the last 3 years. As the overall level of remission cannot be less than zero, the tax officer decides it is appropriate to maintain the remission level at 0%.

•

Third, the tax officer considers all other relevant facts and circumstances to determine whether further change to remission level is warranted. They determine that it is appropriate to maintain the level of remission, as MediumCo

–

has not demonstrated any mitigating circumstances

–

has engaged in exacerbating behaviours during the audit by attempting to obstruct detection of their failures.

•

Finally, the tax officer considers whether the outcome ($11.88 million with no remission) is fair, just and proportionate in the circumstances. The tax officer considers that, notwithstanding the egregious nature of MediumCo's conduct, this outcome would be disproportionate and the overall magnitude of penalties means it would be fair and reasonable to remit some of the penalty. Overall, the tax officer determines it would be appropriate to remit the penalties by 74.74% to produce an outcome that is fair and just in the circumstances while balancing with the egregious and deliberate conduct of MediumCo in failing to comply with their STP reporting obligations.

227. The tax officer issues a penalty notice to MediumCo which includes its liability to pay penalties totalling $3 million in respect of 500 false statements, the reasons MediumCo is liable to the penalty, and the reasons it was not remitted in full.

Example 6

228. TechCorp is a digital service provider specialising in payroll software with a customer base of 35,000 employers. TechCorp is not a registered tax or BAS agent.

229. TechCorp pushes out an update patch for its customers to install. Due to inadequate testing, it hasn't been identified that this update patch causes some incorrect information to be drawn from an unintended source and included in STP reporting lodged by their customers, including LMNOP Store.

230. A tax officer following the process set out in this Practice Statement in relation to LMNOP Store's STP reporting will firstly determine the type of penalty which is applicable in the circumstances. LMNOP Store's STP reporting was lodged by the due date and in the approved form. However, where the errors in LMNOP Store's STP reporting result in the information provided being false or misleading, LMNOP Store has made a false or misleading statement. The penalty that is applicable in the circumstances is a false or misleading statement penalty.

231. Next, the tax officer considers whether the law protects LMNOP Store from this penalty. As TechCorp is not a registered tax or BAS agent, LMNOP Store is not protected from the penalty by a safe harbour. The tax officer considering penalties would need to consider whether LMNOP Store took reasonable care in ensuring the accuracy of their reporting. For the grace period to apply and protect LMNOP Store from a penalty, LMNOP Store must correct their reporting within the applicable timeframe. If it was determined that LMNOP Store did not take reasonable care and did not correct their false or misleading statements within the grace period, the tax officer would continue to follow the process set out in this Practice Statement and potentially assess a false or misleading statement penalty against LMNOP Store notwithstanding that the false or misleading statements in their reporting were the result of TechCorp's error.

Appendix E – Your comments

232. You are invited to provide comments on this draft Practice Statement. Forward your comments to the contact officer by the due date.

233. When providing comments, we invite you to consider the following specific questions:

(a)

Does the step-by-step approach of the draft Practice Statement strike an appropriate balance between clarity of outcomes and maintaining flexibility to take account of an entity's individual circumstances?

(b)

Are the mitigating and exacerbating factors outlined at Step 3 in Appendix C to this draft Practice Statement representative of circumstances that may reasonably arise? Are there any additional mitigating and exacerbating factors that should be considered? Does the guidance on increasing or reducing the remission level appropriately reflect the impact or severity of those circumstances?

(c)

Where an entity becomes liable to penalties because of the actions of a third-party service provider, to what extent should the ATO take this into account when considering imposition and remission of penalties? Should it instead be treated as a matter to be resolved privately between the entity and their service provider?

234. A compendium of comments is prepared as part of the finalisation of this Practice Statement. An edited version of the compendium (with names and identifying information removed) is published to the ATO Legal database on ato.gov.au.

235. Advise the contact officer if you do not wish for your comments to be included in the edited compendium.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Date of Issue: 12 March 2026

Date of Effect: When finalised, this Practice Statement will apply from the date of publication.

File 1-1462AABE

Related Rulings/Determinations:
MT 2008/1
MT 2012/3
TD 2011/19

Related Practice Statements:
PS LA 2008/3
PS LA 2011/15
PS LA 2011/19
PS LA 2012/4
PS LA 2012/5

Other References:
Taxation Administration – Single Touch Payroll – Grace periods for correcting statements
Penalties
Compliance with formal notices – claiming legal professional privilege in response to formal notices
How to make a voluntary disclosure

Legislative References:
Crimes Act 1914 4AA
Budget Savings (Omnibus) Act 2016 Sch 23 22
ITAA 1997 840-906
ITAA 1997 995-1(1)
TAA 1953 Sch 1 16-95
TAA 1953 Sch 1 16-100
TAA 1953 Sch 1 284-75
TAA 1953 Sch 1 284-75(5)
TAA 1953 Sch 1 284-75(6)
TAA 1953 Sch 1 284-75(9)
TAA 1953 Sch 1 284-90(1)
TAA 1953 Sch 1 284-220
TAA 1953 Sch 1 284-225
TAA 1953 Sch 1 286-75(1A)
TAA 1953 Sch 1 286-75(1B)
TAA 1953 Sch 1 286-80(1)
TAA 1953 Sch 1 286-80(2)
TAA 1953 Sch 1 286-80(3)
TAA 1953 Sch 1 286-80(4)
TAA 1953 Sch 1 286-80(4A)
TAA 1953 Sch 1 286-80(6)
TAA 1953 Sch 1 298-10
TAA 1953 Sch 1 298-15
TAA 1953 Sch 1 298-20
TAA 1953 Sch 1 388-50
TAA 1953 Sch 1 388-75
TAA 1953 Sch 1 389-5
TAA 1953 Sch 1 389-5(1)
TAA 1953 Sch 1 389-10
TAA 1953 Sch 1 389-15(3)
TAA 1953 Sch 1 389-20(2)
TAA 1953 Sch 1 389-30
SGAA 1992 12(3)

Case References:

Ciprian and Ors and Commissioner of Taxation
[2002] AATA 746
2002 ATC 2099
50 ATR 1257

Ebner and Commissioner of Taxation
[2006] AATA 525
2006 ATC 2263
63 ATR 1073
[2007] ALMD 2241

Kdouh and Commissioner of Taxation
[2005] AATA 6
58 ATR 1198
2005 ATC 2001
[2005] ALMD 7887

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ISSN: 2651-9526