Published on Sep 27, 2016
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We all make mistakes, however making a mistake on your tax might be a big deal and an extra burden on your cash flow.
Currently, the Australian Tax Office (ATO) gives a penalty to individuals and small businesses for inadvertent mistakes on their tax. The penalties can be as much as 25 percent of the underpaid tax.
Mistakes are generally not deliberate. As a result these penalties are doing nothing to curb further mistakes and increase the cost burdens of running a small business.
Small businesses received 22,000 penalties for making “false and misleading statements” on their tax in 2015, which represents 57 percent of all penalties of this type.
Even more concerning, is 83 percent of all penalties issued for failure to lodge in time were issued to small businesses.
New changes from the ATO aim to address this issue and release the stress on small business owners.
The ATO is planning on introducing leniency for businesses whose turnover is less than $2 million.
Businesses and individuals who inadvertently make mistakes on tax returns such as honest mistakes and late lodgements will now be given another chance.
Cessnock City Council’s Economic Development Manager Jane Holdsworth welcomes the changes for small business.
“Some business owners struggle to pool all their documents together in time to make their tax deadline or may genuinely not know the submission dates.”
The ATO will now let off first offenders who make genuine honest mistakes in their tax. Instead they will pursue penalties for repeat offenders.
After a defined period of several years, the proposal is to swipe the slate clean and offer the ‘one chance’ again.
For more information on the proposed changes to tax penalties for small business please read the ATO’s consultation document.
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