Fact Sheet, July 2020
This guide outlines a clients’ responsibilities when working with their accountant. It highlights the need to provide correct information, review ATO forms prepared, keep appropriate records and be aware of late lodgment penalties.
Responsibility for ATO forms and lodgements (including tax returns)
ATO forms and lodgements are prepared using the records supplied by you and therefore the accuracy depends on these records. Whilst tax agents will exercise all due care and skill in preparing the return, the responsibility for the contents of the ATO forms and lodgements ultimately rests with the taxpayer. Accordingly, we suggest that you carefully review the contents of all ATO forms in detail.
Authorisation for lodgement of ATO forms
In order to authorise the lodgement of ATO forms, a declaration is required under tax legislation and should state that:
- The information you have provided to the tax agent for the preparation of the ATO form, including any applicable schedules, is true and correct; and
- The tax agent is authorised to lodge the return.
Australia’s income tax system is based on self assessment. This means that information provided to the ATO is initially accepted as being true and correct when you lodge your tax return and other ATO forms, including activity statements and pay as you go (PAYG) instalment statements.
For companies and superfunds the Commissioner of Taxation is deemed to have made, on the date that the ATO form is lodged, an assessment of the taxable income and tax payable based on the amounts specified in the ATO form.
However, the law provides that the Commissioner may review and/or audit a tax return and may issue an amended assessment, as appropriate, within prescribed time limits.
The Australian Tax Office is now placing greater emphasis on reviews and audit, utilising various means of checking.
the correctness of the information provided in the income tax returns. Accordingly, it is important to satisfy yourself as to the content of the returns, as heavy penalties may be imposed for incorrect information.
Penalties for failure to lodge documents on time
Penalties may be imposed if a taxpayer fails to lodge an income tax return, a required notice, statement, or other document on time in the prescribed form.
The penalties vary depending upon the size of the taxpayers’ tax obligations. Penalties are imposed for each period of 28 days or part thereof, up to a maximum of five periods, for late lodgement.
The penalties for failure to lodge are currently:
- Small taxpayers, $222 to a maximum of $1,110
- Medium taxpayers, $444 to a maximum of $2,220, and
- Large taxpayers, $1,110 to a maximum of $5,550
- Significant Global Entities (SGEs), $111,000 to a maximum of $555,000.
A medium taxpayer is defined as:
- A medium withholder for PAYG withholding purposes(annual withholding between $25,000 and $1 million),
- An entity with assessable income between $1 million and $20 million, or
- An entity with annual GST turnover between $1 million and $20 million.
A small taxpayer falls below the lower thresholds of all the above ranges and a large taxpayer exceeds the upper thresholds of any of the above ranges.
An SGE has worldwide turnover of more than AUD 1 billion .
General Interest Charge (GIC) may apply where payments are made past the applicable due date.
Record Keeping Requirements
Generally, you must keep your written evidence for five years from the date you lodge your tax return. However, individuals with simple tax affairs only need to retain written evidence for two years. You are classed as having simple affairs where your income consists of salary or wages, interest or dividends and you only claim limited deductions.
A taxpayer carrying on a business is generally required to keep all records that explain the transactions and other relevant actions of the business. A taxpayer is required to keep records of its calculations of taxable income, tax payable and produce them to the Commissioner if required to do so. Such records include any documents containing particulars to any election, notice, estimate, determination or calculation made under tax law. Particulars showing the basis upon which the estimate, determination or calculation was made must also be kept.
Documents that you are required to keep can be in written or electronic form.
Claims carried over subsequent periods
Taxpayers claiming tax losses, depreciation, amortisation or any such reduction of assessable income must ensure they have evidence supporting the original expense(s), and retain these until five years after the last of the relevant claim is made.