Most individual taxpayers in Australia are required to lodge an income tax return each year. The lodgment period runs from 1 July to 31 October for the previous financial year. However, if you use a registered tax agent, you may be eligible for an extended deadline beyond 31 October.
If a taxpayer fails to meet their lodgment obligations, the Australian Taxation Office (ATO) may issue a default assessment. A default assessment is the ATO’s estimation of your taxable income for overdue tax returns. When the ATO issues a default assessment, an administrative penalty of 75% of the tax-related liability will be applied. This penalty can increase to 90% for taxpayers with a history of non-compliance. Additionally, the ATO may impose further penalties for failure to lodge on time.
Before issuing a default assessment, the ATO will send a default assessment warning letter to the taxpayer. If you receive such a letter, it is crucial to lodge any overdue returns by the deadline specified in the letter to avoid the issuance of a default assessment.
If you fail to lodge by the date provided in the warning letter, the ATO will issue a default assessment for the outstanding returns. This assessment will be based on the estimated taxable income outlined in the warning letter.
The Commissioner of Taxation may make a default assessment of a taxpayer’s income based on any reasonable method, considering the taxpayer’s circumstances. This could include using the asset betterment method or comparing the taxpayer’s income to industry benchmarks.
If a default assessment is issued, the taxpayer bears the responsibility of proving that the assessment is excessive. For assessments made on or after 1 July 2013 for the 2013-14 income year or later, the taxpayer must prove that the assessment is either excessive or incorrect. In either case, the taxpayer is required to demonstrate what the correct taxable income should be.
If you have overdue returns or have received a default assessment warning letter from the ATO, it is important to take immediate action to avoid a default tax assessment being issued.
We’re Here To Help
At Quinn Group, the expert team of tax accountants and tax lawyers can help. We understand both the legal and financial aspects of dealing with the ATO when lodgment obligations are missed. If you have received a warning letter or default assessment, our team can help you resolve these issues and bring your tax affairs back into compliance. You can submit an online enquiry or contact us at 1300 QUINNS (1300 784 667) or +61 2 9223 9166 to schedule an appointment with our team.
