Compliance
Failure to lodge penalty
The failure to lodge penalty is charged by the ATO when a BAS, tax return or similar document is lodged after its due date, and it builds up for each 28-day period it remains outstanding.
When a Business Activity Statement or other tax document is not lodged by its due date, the ATO can apply a failure to lodge penalty. It is a separate charge from any tax owing and from interest. The point is to encourage timely lodgment, because the ATO relies on regular reporting to collect GST and PAYG amounts and to keep the system running smoothly.
The penalty is worked out using penalty units for every period of 28 days, or part of a period, that the document is late, up to a maximum number of periods. The number of units is then multiplied depending on the size of the entity, so larger entities face larger penalties than small ones. Because the dollar value of a penalty unit is set by legislation and changes over time, you should check the ATO website for the current figure rather than relying on an old amount.
The penalty applies even when no tax is owing. This surprises many small business owners. If a business is registered for GST and has a Nil BAS, meaning no sales and no purchases to report, it must still lodge it by the due date. A business that is inactive but has not cancelled its registration can accumulate penalties for several periods of unlodged BAS without realising it.
It also applies even if the business cannot pay. Lodging on time and paying late is generally a better position than lodging late, because the penalty for failing to lodge is separate from the interest on the unpaid amount. Once the BAS is lodged, the ATO can then discuss a payment plan, which is difficult to do while returns are outstanding. Many payment arrangements require all lodgments to be up to date.
The ATO has discretion to remit the penalty, in whole or in part. Examples of situations where remission may be considered include serious illness, natural disasters, a death in the family, incorrect advice from the ATO, or events outside the person's control. A clear explanation, with supporting documents, is the most effective approach. Businesses with a good compliance history are generally treated more favourably.
Registered tax and BAS agents often have lodgment programs that provide additional time, but this applies only if the agent has the business on its client list and the arrangements are in place before the original due date. Businesses should not assume that appointing an agent after a due date will remove the penalty. Where lodgment is overdue, acting quickly limits further charges.
Because penalties depend on the entity and the period involved, this page is general information only. Confirm your position with the ATO or a registered tax professional.
Worked example
A small business with a quarterly BAS due on 28 October lodges on 20 December, about 53 days late. The BAS shows net GST of $3,300 payable. The failure to lodge penalty is charged for each 28-day period or part period, so two periods apply here, and the ATO also charges the general interest charge on the $3,300 from the due date. Lodging on time would have avoided the penalty.
Practical tips
- Lodge a Nil BAS on time, because the penalty can apply even when no GST is owing.
- Lodge by the due date even if you cannot pay, then ask the ATO about a payment plan.
- Cancel your GST registration if the business has closed, so you are not required to keep lodging.