Remission of Penalties

Tax laws allow the ATO to impose administrative penalties for a range of behavior, including not taking reasonable care in claiming a deduction to which you are not allowed or making a false or misleading statement.

The purpose of the penalty requirements is to encourage taxpayers to take realistic care in complying with their obligations.

The law specifies the situation making you liable to a penalty and the amount of the penalty. However, ATO has discretion to reduce (remit) the penalty amount according to individual circumstances, so ATO frequently remit a penalty before advising you of your tax debt.

If you’re dissatisfied with a penalty imposed on you, you may, in most cases, ask ATO to remit it. You know how to also object to some penalties through the objection process.

For the following penalties you can’t request a remission, you must object to the penalty instead:

  • a tax shortfall
  • a false or misleading statement (in a tax return, business activity statement, fuel scheme claim form or super statement – including member contribution statement, lost member statement and departing Australia superannuation payment report).

If a tax debt was paid late (deferred) rather than permanently avoided, there may be scope to remit the punishment in full or in part. The level of reduction would be influenced by the period of delay and any tax avoided as a result of the rearrangement. Similarly, if a deduction or credit is claimed in the incorrect taxpayer’s return or activity statement but there is no shortfall amount in overall terms, a penalty may be remitted in full. If the two taxpayers have different tax rates there will be unusual shortfall amounts for each taxpayer and a net overall shortfall amount. Where this happens the penalty may be remitted so that it equals the punishment that would be useful to the net overall shortfall.

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