The Commissioner of Taxation is encouraging taxpayers to declare tax shortfalls at their own discretion.
Usually, an underpayment in tax will incur a serious penalty on top of interest. However, taxpayers who disclose shortfalls without any prompting from the ATO will attract favourable concessional treatment for both tax penalties and interest charges. If the shortfall is under $1000 there will be no penalty, but if it is $1000 or more, then the penalty will decrease by 80 per cent.
For taxpayers that disclose shortfalls after being notified by the ATO of a tax audit, they will only attract a 20 per cent penalty tax. The Commissioner has the power to suspend a shortfall penalty when the matter is reasonably argued, or retain the penalty when voluntary disclosures are continually made about amounts that are not withheld. At their discretion, the interest charge of the shortfall can be reduced. But, they must consider the subjective circumstances of the taxpayer and whether those circumstances are fair before they impose a penalty.
The ATO will impose serious administrative penalties for undisclosed shortfalls and refer it to criminal prosecution.
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To speak with your team of accountants about tax shortfalls please contact Leenane Templeton today!