Updated on 15 February 2022
Every Australian taxpayer has the obligation to lodge or advise of non-lodgment of an annual income tax return with the Australian Taxation Office (ATO). If they fail to meet this obligation, the ATO will issue what is known as a default assessment. Why is this scary? You may miss out on claiming expenses and deductions in your tax return!
The ATO’s preferred approach is to work with taxpayers to help them meet their lodgment obligations. However, they may issue a default assessment if a cooperative approach is unsuccessful.
A default assessment is an assessment of:
- taxable income – for overdue tax returns
- net amount or assessable amount – for overdue activity statements.
Furthermore, an administrative penalty of 75% of the tax-related liability may be applied for each default assessment the ATO issues. This penalty may be increased to 95% of the tax-related liability in certain circumstances for taxpayers who have a pattern of non-compliance. The ATO can also apply another penalty for failing to lodge on time.
Before issuing a default assessment, the ATO will send a warning letter to the taxpayer or their registered agent. The letter includes:
- details of the default assessment
- the date the overdue obligation needs to be lodged by to avoid us issuing a default assessment.
If the overdue obligation is not lodged by the date stated in the default assessment warning letter, the ATO will then issue the default assessment with the applicable administrative penalties.
We at the Quinn Group are Chartered Tax Accountants and tax lawyers; understanding both sides of the ATO’s sword against you when you miss a lodgment. If you have any overdue lodgments or have received a warning letter or default assessment, our team can assist you to deal with the ATO to bring your tax affairs in order.
If you would like help with respect to taxation and your lodgment of returns, please contact one of our experienced tax accountants by clicking here to submit an online enquiry form, calling us on 1300 QUINNS or alternatively, +61 2 9223 9166 to arrange a teleconference or appointment.