Failing to lodge a tax return by the due date in Australia results in automatic Failure to Lodge (FTL) penalties from the ATO. In 2026, penalties are calculated at one penalty unit ($330) per 28-day period the return is overdue, up to five penalty units ($1,650) for individuals. Interest also accrues on any outstanding tax debt. However, the ATO has discretion to remit penalties, and acting promptly is always the best strategy if you have missed a lodgement date.

Failure to Lodge Penalty in 2026

  • Penalty rate: $330 per 28-day period overdue (1 penalty unit = $330 in 2026)
  • Maximum penalty for individuals: $1,650 (after 5 penalty periods)
  • For businesses: Multiplied by 2x (small businesses), 5x (medium), or 5x (large) the individual rate
  • Interest: General Interest Charge (GIC) at approximately 11% per annum accrues on any unpaid tax from the due date

ATO Penalty Remission

The ATO has statutory discretion to remit FTL penalties in full or in part. Remission is more likely when:

  • You have a good prior compliance history (first-time breach)
  • Non-lodgement was due to circumstances outside your control (illness, family emergency, natural disaster)
  • You proactively contact the ATO before enforcement action commences
  • You lodge all outstanding returns promptly when contacted

A registered tax agent negotiating on your behalf typically achieves better remission outcomes than self-representation, particularly for businesses with larger penalties.

Multiple Years of Overdue Returns

If you have multiple years of outstanding tax returns, the ATO can issue default assessments based on estimated income — often significantly overstating your actual income. These attract full penalties and interest from the original due date. The most effective approach is to engage a tax agent to lodge all outstanding returns correctly, which then replaces any default assessment with the correct liability — usually resulting in a much lower debt, with the opportunity to negotiate penalty remissions.

Director Penalty Notices

Company directors have personal liability under the Director Penalty Notice (DPN) regime for unpaid PAYG withholding and super guarantee amounts. If a company's BAS or STP reports are not lodged within 3 months of due date, the ATO can issue a "lockdown" DPN making directors personally liable for these amounts with no right of remission. This makes timely BAS and payroll lodgement critical for all company directors.

Frequently Asked Questions

What if I can't afford to pay my tax debt?

Lodge your tax return on time even if you cannot pay the resulting tax debt. FTL penalties for late lodgement are separate from and additional to any debt you owe. Once you have lodged, contact the ATO to set up a payment plan (ATO Online Services or by calling 13 11 42). Interest continues to accrue on unpaid debt even under a payment plan, but penalties are generally not added once a compliant payment arrangement is in place.

How many years back can the ATO go for overdue returns?

There is no statutory time limit on the ATO's ability to require lodgement of overdue tax returns. The ATO can and does pursue returns that are 10+ years overdue, particularly for individuals or businesses with assessed or potential tax liabilities. Outstanding lodgement obligations also appear on your tax record and can affect your registration status as a tax agent client.

Have overdue tax returns or ATO debt? Contact AWTS — we specialise in lodging outstanding returns and negotiating with the ATO to minimise penalties and settle debts affordably.