Accounting: Making Sure 2 + 2 = 4

Penalties you can face for failing to file a personal tax return

27 February 2019

Dwayne Barnes

Every year, individuals earning a certain minimum amount of income are required to file an individual tax return. You can file as an individual, or jointly as a married couple. Filing is important because it allows the Australian Tax Office to determine how much in taxes you should pay during any given year. As you probably know, taxes are a primary way through which the government raises revenue to deliver important public services.

You would be surprised just how many people fail to file their returns every year. This could be because they simply forgot or they don't realise why it's important. While many people don't like paying taxes, you can experience significant consequences by forgetting or neglecting to file your tax returns. Some of these consequences are as follows:

Tax Liens

In most cases, individuals who fail to file their tax returns may end up owing back dated taxes to the ATO. If you owe money in taxes, the government may come after your personal assets to satisfy the debt. One of the channels that can be used is a tax lien.

A lien is essentially a legal claim that the ATO can make against your personal property in the amount of the taxes owed. For example, if you owe $3,000 in back dated taxes, the ATO may make a legal claim against your personal vehicle or other assets to satisfy the amount owed. This legal claim means that you can't sell, trade, or use the claimed assets as collateral for a loan (until the back taxes have been paid).

Levies from the ATO

Ever heard of the expression "from the frying pan into the fire"? If a tax lien is the frying pan, then a levy is the fire. When the ATO notifies you of a lien against your property, it means that they're coming to seize your assets so they can satisfy an outstanding tax debt.

Once a lien is issued, it can be very complicated to reverse. You will often have a limited amount of time to pay the outstanding amount (or to negotiate a payment plan) before the lien is enforced. Therefore, seeking the help of a professional tax accounting service will be essential during this timeframe.

Seizure of income

If you fail to file your returns, or you owe taxes to the ATO, you may have your income seized to satisfy an outstanding debt. The ATO can issue a directive to your employer, legally obligating them to deduct a specific amount from your income and put it towards what you owe.

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About Me

Hello. When you are at school, maths can seem so complicated at first. But then you learn about numbers and all of sudden everything seems as easy as 2 + 2 = 4. I used to be pretty good at maths so when I started my own business, I didn't think I needed to hire an accountant. After all, why should I pay someone else to do something that I could do myself? However, I very quickly learnt two important lessons. Lesson one was that accounting and doing the books will take a lot longer than you might think and, secondly, it is actually pretty complex stuff. In the end, I decided to hire a professional accountant. He is great and he has taught me a lot of cool stuff.