Paying off tax debt - Lodgement Penalty Amnesty Program
- Business Insights
- May 9, 2023
- 2 min read
Updated: May 10, 2024
On 9 May 2023, the Federal Government announced the Small Business Lodgement Penalty Amnesty Program a part of the 2023-2024 Budget.
The amnesty applies to overdue income tax returns, business activity statements, and fringe benefits tax returns that were due between 1 December 2019 and 28 February 2022. During the Covid-19 pandemic, the Australian Tax Office (ATO) restrained its small business tax debt collection activities to help struggling small businesses. The tax debt owed by small businesses to the ATO has now grown to AUD$30 billion. To encourage small businesses to re-engage with the tax system and get their tax obligations back on track, the Federal Government announced an amnesty for eligible overdue forms lodged between 1 June 2023 and 31 December 2023. The penalty applying to the late lodgement will be remitted. No action is required to request a remission.
To be eligible for the amnesty, a business will need to meet the following criteria:
had an annual turnover of under $10 million at the time the original lodgement was due
have outstanding tax returns or BAS that were due between 1 December 2019 and 28 February 2022
lodge between 1 June and 31 December 2023
originally due during the period from 1 December 2019 to 28 February 2022.
Paying off tax debt
Paying off tax debt owed to the ATO can be very challenging for small businesses, especially after the delayed lodgement of income tax returns and business activity statements (BAS), and the culminative tax debt owed. This is one of the reasons why many small businesses are behind on their lodgement obligations to the ATO.
Tax debts add to the cash flow burden of the business. Unfortunately, poor cash flow management kills 90% of all small businesses.
Small business owners should organise funding options early on to meet tax obligations and paying off tax debts before the tax office takes punitive action. If cash flow stress in the business is at breaking point, the funding options will likely be limited and the cost of borrowing much higher as lenders place a risk premium on the interest charged.
There are ways to paying off your tax debt
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