ATO proposes ‘one chance’ to avoid penalty | KPMG | AU

ATO proposes ‘one chance’ to avoid penalty

ATO proposes ‘one chance’ to avoid penalty

Sarah Blakelock and Suzie Emery discusses an ATO report on proposed changes to the imposition of penalties for small businesses and individuals.


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On 8 March 2017, the Australian Taxation Office (ATO) released a report that consolidates feedback it has received following community consultation about proposed changes to the imposition of penalties for small businesses and individuals. In broad terms, the ATO sought feedback about amending its administrative framework to give these taxpayers ‘one chance’ before imposing certain penalties.

The proposed changes

The ATO sought feedback about its proposal to reshape its approach on penalising small business and individuals for:

  • false or misleading statements for failure to take reasonable care for errors made in income tax returns and activity statements; and
  • late lodgement of income tax returns and activity statements.

Under the proposal, individuals and small business entities (being entities with turnover under $2 million) will be afforded ‘one chance’ before the ATO applies the above penalties. This would represent a considerable shift to the current administrative practice of first applying these penalties and then requiring the taxpayer to apply for a remission of that penalty.

The ATO made it clear in the consultation paper the proposal would not extend any chances to taxpayers who are reckless, act dishonestly or cease engagement with the ATO during an audit or review.

The stakeholder feedback also covered when the ‘one chance’ policy would be reset for a particular taxpayer. The ATO consultation paper suggested that a taxpayer would be given ‘one chance’ every three to four year review period. However, community feedback suggested a 24 month period may be more appropriate.

The ATOs report records an overall positive response from stakeholders to the ‘one chance’ proposal but there are some alternative approaches and concerns raised.

In terms of next steps, the ATO has indicated that it will consider the stakeholder responses further and ‘share more information in the future’.

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