19 business days until the deadline!
Since May this year, the Australian Taxation Office (ATO) has remitted its failure to lodge (FLT) penalties for eligible small businesses that lodged certain tax returns under its Lodgment Penalty Amnesty. The clock is ticking and the amnesty is only available until 31 December 2023—that's 19 business days from 1 December!
Once the amnesty ends, businesses will have to apply for ordinary penalty remissions on a case-by-case basis.
The amnesty aims to encourage small business to meet its lodgment obligations and reduce the financial burden of penalties on businesses that fell behind in submitting its tax returns. Businesses may have not lodged its tax returns due to economic issues resulting from COVID-19 and other factors impacting standard tax reporting practices.
The amnesty includes income tax returns, business activity statements (BAS), and fringe benefits tax (FBT) returns. The amnesty does not cover late superannuation obligations and other penalties related to the Taxable Payments Reporting System.
To be eligible, small businesses must meet the following criteria:
- Annual turnover was less than $10 million at the time the original lodgment was due.
- The outstanding returns were due between 1 December 2019 and 28 February 2022.
Beyond the financial benefit of getting penalty relief, taking action and submitting overdue tax returns enables businesses to get a clear understanding of their financial position and enable informed decisions for better financial planning and management.
Given the deadline is approaching, it's crucial small businesses act promptly by taking the following steps:
- Assess its compliance status and identify any outstanding income tax returns, BAS, and FBT returns to determine eligibility for the Lodgment Penalty Amnesty1 based on the ATO guidelines.
- Collate all relevant financial and tax-related information required for the lodgments.
- Submit the outstanding lodgments through the usual channels before the 31 December 2023 deadline.
- Wait for the ATO to automatically remit any eligible fines (i.e. penalty remission forms are not required).
Upon small businesses owners ensuring its ATO lodgments are up to date, they will then understand their tax debt position, which could be significant, and the business may not have the funds or cash flow to make the payment.
The ATO may consider a payment plan but the ATO states these require an upfront payment and should be "completed in the shortest possible time". So, if paying in full is not possible or the ATO is not agreeable to a payment plan, the business could consider a small business restructuring (SBR) appointment.
For a business to be eligible for a SBR, the following criteria applies:
Operating through a company structure
- Liabilities of less than $1 million.
- Employee entitlements up to date.
- Tax lodgments up to date.
- SBR process not previously used.
The SBR process lasts 35 business days (extendable by 10 business days). The main steps in the process from the directors and their advisors are:
- Engage a SBR expert who is qualified to administer (all registered liquidators are entitled to act and be appointed as a restructuring practitioner).
- Collaborate with SBR expert to develop a strategic plan.
The SBR expert then:
- Validates the plan with ATO and other creditors.
- Certifies the restructuring plan and presents to creditors.
- Has creditors vote (excluding related creditors).
- Implements restructuring plan upon approval.
Footnotes
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
