Tax penalty amnesty: 7,200 small businesses come forward in first two months to avoid hefty fines

An Australian Taxation Office policy allowing small businesses to lodge overdue tax debts without attracting late payment penalties has proven a smash hit in its first two months, with 7,200 business already stepping forward.

The Lodgment Penalty Amnesty Program, announced in the 2023-2024 federal budget, allows small businesses with an aggregated annual turnover below $10 million to confess some overdue payments to the tax office without attracting significant penalties.

The amnesty covers payments that originally fell due between December 1, 2019, and February 28, 2022, a period in which small businesses were hard-hit by bushfires, flooding and the economic turmoil caused by the COVID-19 pandemic.

The tax office’s leniency towards late payments through that tumultuous period is coming to an end, as it attempts to recoup an estimated $30 billion in overdue tax.

Through that lens, the Lodgment Penalty Amnesty Program represents one of the ATO’s last sweetheart deals for small businesses before it turns to more traditional recovery methods.

Since launching on June 1, 2023, 7,200 small businesses have taken advantage of the amnesty, an ATO spokesperson confirmed to SmartCompany on Wednesday.

More than 19,500 eligible overdue forms have been lodged as part of the amnesty.

Although the amnesty allows small businesses to avoid fines, the ATO has reminded entrepreneurs it does not entirely absolve them of their debts.

“The amnesty is not a deferral of lodgment obligations,” the spokesperson said.

“Lodging these forms is not optional and we urge small businesses to take advantage of this unique opportunity as soon as possible so they can get back on track with their obligations, penalty-free.

“A small business with up-to-date lodgments will have a much better understanding of their financial position, including any amounts they owe to the ATO.

“Small businesses who can pay should ensure this is done on time and in full to prevent the accrual of additional interest charges.”

The amnesty officially ends on December 31 this year.

In keeping with usual practice, the ATO is also reminding small businesses with debts under $100,000 they may be able to use the ATO’s online self-service system to organise a payment plan.

Businesses with late payments outside of the amnesty period can also apply for ordinary penalty remissions on a case-by-case basis.

You can read more about the amnesty scheme here.