Stephen Gottlieb and Michael Nguyen discuss the recent sharp increases to 'failure to lodge on time' penalties for SGEs.
There have been a number of legislative changes aimed specifically at Significant Global Entities (SGEs). These measures include the Multinational Anti Avoidance Legislation, the Diverted Profits Tax, Country by Country Reporting and General Purpose Finance Statements.
Legislation has now been passed to materially increase administrative penalties for SGEs with effect from 1 July 2017.
The legislation contains a specific definition of an SGE, but broadly, an entity is an SGE where its annual global turnover is A$1 billion or more or it is part of a group with annual global turnover of $A1 billion or more.
These increased administration penalties include 'failure to lodge on time' penalties. These include a failure by an SGE to lodge a return, notice, statement or other approved form by the due date.
|Days late||28 days (4 weeks) or less||29 - 56 days (4 - 8 weeks)||57 - 84 days (8 - 12 weeks)||85 - 112 days (12-16 weeks)||112 days or more (16 weeks or more)|
|New Penalties* from 1 July 2017||$105,000||$210,000||$315,000||$420,000||$525,000|
*Based on the MYEFO increases being legislated. In the case of four weeks or less this results in an increase from $90,000 to $105,000 as above.
The increased penalties will apply to all lodgements due after 30 June 2017. These include but are not limited to, Income Tax Returns, Notices, Activity Statements, Country by Country reports and General Purpose Financial Statements.
The Australian Taxation Office (ATO) has stated that an initial late lodgement will result in a 'reminder'. The ATO will not impose a penalty unless a reminder has been given on a previous occasion. There are guidelines for remission of these penalties, but the circumstances of remission are restricted.
Taxpayers should not rely on receiving an extension of time to lodge from the ATO as these are forthcoming only in restricted circumstances.
In addition to the above, the base penalty amounts for SGEs in respect of 'culpable behaviour' are to be doubled.
These penalties could be applied to statements in relation to income tax, goods and services tax (GST) or fringe benefits tax (FBT) irrespective of whether or not the statements are associated with a tax shortfall.