You may soon receive a letter from the ATO and the ATO will decide your tax with their own information.
The ATO has started writing to tax agents to ask them to lodge their clients’ late returns. The letters also set out an estimate of the assessable income they think each individual taxpayer has earned.
If you have outstanding tax returns, and your tax agent does not lodge your return by the due dates specified on the letter from the ATO, the ATO will assess your tax based on the ATO’s estimate.
In addition, and painfully, you may also be charged:
penalties for failing to lodge on time;
administrative penalties of 75% of the tax liability set out in the default assessment; and
a further 20% increase on the administrative penalty if you have previously been penalised for a default assessment.
General Interest Charge (GIC) may be put on your account based on the amount of tax payable plus the GIC.
If you disagree with the ATO’s estimate of your assessable income, you and your tax agent can simply arrange to lodge a tax return with the correct figures.
If the ATO doesn’t receive your tax return by the due date on the letter, it will issue the default assessment along with the penalties set out in the letter. Although you can challenge the ATO’s tax figure by formally objecting the assessment, it will be costly and time consuming.
So if you haven’t yet lodged your outstanding tax returns, contact your tax agent or our office to prepare your tax return as soon as possible. Otherwise, you may receive a surprise tax bill from the ATO in this Christmas season.
