Every year, thousands of Australians face the challenge of tax time. While some people lodge their returns straight away to claim refunds, others procrastinate or forget. If you fall into the latter group, it’s important to know that the Australian Taxation Office (ATO) has strict rules in place for late lodgement. One of the biggest risks is the Failure to Lodge (FTL) penalty, and it can quickly add up if you ignore it.
The ATO applies the FTL penalty to encourage individuals and businesses to meet their obligations on time. The penalty is based on penalty units, which are set by law and adjusted over time.
As of 2024–25, one penalty unit equals $330. Here’s how the calculation works:
1️⃣ $330 for every 28 days late (or part thereof).
2️⃣ The penalty applies until the return is lodged.
3️⃣ For individuals and small entities, the maximum penalty is 5 units = $1,650.
👉 If you are 1 month late → you owe $330.
👉 If you are 2 months late → you owe $660.
👉 If you are 3 months late → you owe $990.
👉 If you are 5 months or more late → you hit the maximum cap of $1,650.
This is in addition to any tax you still owe the ATO.
Yes, the penalty applies to individual tax returns, not just businesses. Many people mistakenly think the ATO is more lenient with individuals, but that’s not the case. If you fail to lodge on time, you are still at risk of a penalty.
That said, the ATO takes a practical approach. For example:
✅ If your tax return results in a refund or a nil balance, the penalty is often not applied.
✅ If you have a genuine reason for being late (such as illness, natural disaster, or other unforeseen circumstances), you can request a remission of the penalty.
✅ Using a registered tax agent may give you access to extended deadlines and “safe harbour” protections.
Lodging your tax return late is not just about avoiding the $330 penalty. It has several other consequences:
1️⃣ Interest on unpaid tax – If you owe money, the ATO charges interest (called the general interest charge, or GIC) on overdue amounts. This adds up daily until the debt is cleared.
2️⃣ Refund delays – If you are due a refund, you’ll only get it once you lodge your return. The later you lodge, the longer you wait for your money.
3️⃣ Future financial impact – Up-to-date tax returns are often required when applying for home loans, visas, or government benefits. Being late can complicate these processes.
4️⃣ ATO compliance history – Repeated late lodgements can trigger closer monitoring by the ATO, making you a “high-risk” taxpayer in their system.
If you know you won’t be able to lodge on time, there are steps you can take to reduce or avoid penalties:
📌 Engage a registered tax agent early – Many agents have extended lodgement deadlines with the ATO.
📌 Contact the ATO directly – If you’re facing hardship, the ATO may grant an extension or agree to a payment plan.
📌 Request remission – If you do get hit with a penalty but have valid reasons, you can apply to have it reduced or cancelled.
📌 Stay organised for the future – Keep all your financial records in one place to make the process easier next year.
Not lodging your tax return on time can be costly. With a $330 penalty every 28 days (up to $1,650), plus possible interest and compliance consequences, it’s far better to lodge on time — even if you can’t pay right away.
✔️ Tip: If you expect a refund or owe nothing, don’t delay. Lodging quickly gets your money back and ensures you stay in good standing with the ATO.
Sources:
ATO – Failure to lodge on time penalty
H&R Block – What happens if you don’t lodge a tax return?
