Over the past few years, the ATO has taken a more understanding and flexible approach when it came to late lodgements and overdue tax debts. In many cases, penalties and interest were able to be reduced or even fully remitted.
That approach has now changed.
The ATO is returning to a much stricter stance on compliance. We are now seeing far less willingness to remit penalties and interest, even where there may have previously been some leniency.
At the same time, there has been an important change to the tax treatment of ATO interest. Interest charged on overdue tax debts is no longer tax deductible. This significantly increases the real cost of carrying an ATO debt.
In practical terms, this means:
- Lodging late is more likely to result in penalties that will stand
- Interest on unpaid tax is now a real, after-tax cost
- Using the ATO as a “bank” is no longer a cost-effective strategy
The message is clear — it is now more important than ever to ensure that:
- All lodgements are completed on time
- Any outstanding tax debts are brought up to date
- Future tax obligations are planned for and paid when due
If you do have any overdue lodgements or outstanding ATO debts, we strongly recommend addressing these sooner rather than later. The earlier issues are dealt with, the more options are generally available.
For some businesses, improving this position may require a broader look at cashflow or financing arrangements. If you would like, we can work with you to review your cashflow, assess upcoming obligations, and explore more effective ways to fund or manage tax payments going forward.
We are currently working with a number of clients to review their position, bring lodgements up to date, and put strategies in place to manage upcoming tax obligations.
If you would like us to review your situation or assist in getting everything up to date, please feel free to contact us here or on 02 4910 5555.
