Much like sailing off without a good navigational system, going into a business venture is all fun and exciting until fines and audits come chasing your tail due to a lack of planning for handling your taxes. Taking off without a map can only get you so far. Thus, it is imperative to learn the payment requirements of the Australian Tax Office (ATO).
In this compact guide, we will teach you the know-how of Business Activity Statement (BAS) and taxation obligations, so you can worry less about missing the deadlines or how to tackle penalties and fines. Feel free to read on and learn the fundamental tips that can help small business owners avoid the dreaded ATO audits and penalties for late filing of Tax Returns and BAS lodgements.
True enough, various tax rules set by the ATO apply to different business structures. Hence, it would be best to have an expert opinion in dealing with business tax compliance and keeping the financial record up to date. In Australia, different penalties exist for late filing, late payments, and failure to notify tax payment liability. ATO maintains that penalties “encourage taxpayers to take reasonable care in complying with their tax obligations.” However, if it is possible to avoid fines altogether, wouldn’t it be great? This is the reason why it is essential to pay enough taxes before due dates come.
Apart from paying the right amount on time, there are several measures you can take to avoid nontax payment penalties. The list includes the following:
Keep accurate records of business activities
Declare all company income
Register your business for all taxes
Use legitimate business structures (i.e., specify if you are a partnership, sole proprietorship, corporation, trading trust, or limited liability company, since this determines the amount of tax your company will pay)
The business portal is a free secure website established and maintained by ATO for business owners to help them manage your business tax affairs with ease. It can be used to lodge activity statements, request refunds, view single touch payroll (STP) reports, and other tax-related activities. Just set up your myGov ID and Relationship Authorisation Manager (RAM), and you should be able to access a range of online government services in one tap. However, most business proprietors already have too much on their plates and adding BAS lodgements and company taxes into the equation can be overwhelming.
No worries, though, because at Aone Account and Bookkeeping, we do regular financial health checks to ensure that your business is smooth sailing. We also take pride in our qualified internal accountants who can take care of your tax compliance through proper tax strategy.
If you get easily confused by dates, you need to mark the crucial days for BAS reporting and tax affairs. Check out the updated list of ATO due dates and set a reminder ahead of time to stay on top of your game. Remember, consistently missed deadlines are red flags for the ATO that may force them to impose tax and non-tax penalties for your business. Now, you may be wondering how late you can file your reports. Well, the answer is it depends. For instance;
Income Tax Returns – After the financial year ends, the prior year’s tax returns can be filed until 31 October of the following year. Tax agents and accountants are granted a grace period for lodging tax returns until 15 May of the year following the deadline. For example, if the ITR is due on 31 October 2021, then tax agents have until 15 May 2022 to file it. Beyond that date, ATO has the right to impose a failure to lodge (FTL) penalty.
BAS Lodgement – BAS lodgement is done quarterly, with the filing day being due on the 28th day before the current BAS period (e.g., December 2020 Quarter BAS’s are due 28 January 2021). However, lodging through a BAS agent will grant you an extended due date concession on the 25th day, two months following the respective BAS period (e.g., ATO can extend the Quarter BAS’s due date from December 2020 up to 25 February 2021). On the other hand, businesses lodging monthly are due on the 21st day following the respective BAS period, with no extended grace period afforded to quarterly lodgers. Monthly lodgers can change to quarterly reporting only if your business has a 20 million sales turnover. In such cases, you can contact the ATO if you wish to make the switch, as long as your business is not mandated to lodge monthly for other reasons.*
Breaching tax laws may cause you to be subjected to the ATO’s penalty system where they issue Penalty Units. The most recent system is shown in the table below:
However, you can still keep your cool because the good news is: ATO generally does not apply penalties in isolated cases of late lodgement. For instance, ATO can waive fines if the entity has maintained a good lodgement history or has been subjected to extenuating circumstances impacting its ability to lodge (i.e., natural disaster or severe illness). In these scenarios, you can still apply to have the penalty and interest charges reduced or remitted.
If neither of the above situations applies, then I am afraid that you will need to lodge and pay your ITR or BAS report, including any incurred penalty and interest, as soon as possible. In extreme cases where you fail to remit the immediate payment, it is advisable to ask the ATO for a payment arrangement for the tax liability not to hurt your cash flow too much. However, the tax office will surely still apply general interest charges.
Fortunately, all hope is not lost through the help of certified Aone accountants. Since no two late payments are alike, our trusted experts can review your circumstances to decide whether it is possible to reduce if not waive the penalties and interests.
It is in your best interest to seek professional advice when handling your company taxes and compliance. Call us at (02) 4555-1847 and enjoy a FREE 1-hour, no-obligation consultation on your tax compliance requirements.
It is in your best interest to seek professional advice when handling your company taxes and compliance.
Call us at (02) 4555-1847 and enjoy a FREE 1-hour, no-obligation consultation on your tax compliance requirements.
* Due dates may change so please consult your accountant or check the ATO website for updated dates.
