20 February 2025
Over the last twelve months, the ATO has begun taking a hardline approach to overdue taxpayer debts and remission of penalties. Clamping down on late ATO BAS lodgement, tax, and superannuation lodgements, their approach has become ruthless.
“This shift in approach comes off the back of the COVID and post-COVID years, where the ATO was more lenient on tax debts,” says AR & B Advisors Director, Kris Elliot. “They were aware that businesses were treating it almost like an unofficial debt facility, delaying tax payments as a way to manage their cashflow.”
Over time, the ATO started to feel like taxpayers were taking advantage of this, and in some cases flaunting their tax obligations to receive quite generous outcomes. Now the ATO is clear: they’re not a bank, and they want business taxpayers to meet their obligations in full going forward.
AR & B Advisors are here to help you manage your tax obligations and ensure that you stay on the right side of the ATO.
Managing your ATO obligations
With these stricter conditions imposed, it’s imperative that ATO BAS lodgement and tax deadlines are met.
Any tax debt will incur interest immediately after the payment due date. The interest charged is significant, too, with the ATO currently charging an 11.36% general interest rate on overdue debts, which is compounded daily on the amount overdue.
ATO penalties for late lodgement should now be expected, too. Failing to lodge on time may also incur a fine, the nature of which will depend on the size of the business. The fine is calculated on a penalty unit of 28 days (or part thereof) from due date, up to a maximum of five penalty units.
- Medium entities, with an assessable income or current GST turnover of more than $1 million and less than $20 million, can expect to pay $660 per penalty unit.
- Large entities, with an assessable income or current GST turnover of $20 million or more, can pay $1650 per unit.
When a business can’t make the ATO BAS lodgement date
In light of the ATO’s focal shift, Kris recommends taking a proactive approach. “If it looks like your business won’t meet its tax obligations, for whatever reason, the important thing is to get ahead of it,” he says. “This is the only way to avoid ATO penalties for late lodgement.”
You can speak with your accountant or advisor to discuss asking the ATO for an extension or deferral.
“When requested early, it’s more likely to be granted, as the ATO looks more favourably on proactive requests. But there needs to be a legitimate reason. If it’s simply a lack of time, planning, or preparation, it’s not likely to be granted,” cautions Kris.
Extensions can be granted on grounds of:
- Personal reasons
- Staff shortages, causing the business to be behind on its accounts
- A major event where the business can’t get on top of its ATO lodgement obligations
If you do miss your lodgement date and end up facing ATO penalties for late lodgement, you can organise an ATO payment plan. While this still burdens you with debt, it provides a clear pathway forward to manage your payment.
However, it’s not something that a business should rely on, particularly with the changing interest rules.
Tax interest is changing in 2025
On 13 December 2024 the Government announced that it was amending its current tax law.
Starting 1 July 2025, businesses are no longer able to claim the ATO’s general interest charges or shortfall interest charges as a tax deduction.
There is now no longer a financial benefit to having a tax debt, providing greater incentive for businesses to pay off their tax debts sooner.
The risks associated with a debt payment plan
While organising an ATO payment plan is an option, it carries a significant amount of risk.
Businesses must meet the payment terms—even one late payment can result in the ATO cancelling the payment plan and restarting the debt collection in full.
Directors face increased risk, too. A company director is responsible for ensuring the business tax obligations are met on time. If the company doesn’t meet its obligations by the due date, the ATO may seek to recover the debt from the director instead. In this case, the ATO will issue a Director Penalty Notice (DPN), advising they are personally liable for the company’s debt.
The number of DPNs issued has increased over the past year, further demonstrating the ATO’s hardline approach.
How businesses can maintain compliance
“Most businesses are aware of their ATO lodgement requirements. It’s just a matter of getting it done,” states Kris.
To achieve this, businesses should look at their processes. Ensure that you have the necessary systems, checks, and accountability in place so that the right people are providing the right information, at the right times.
Utilising your accounting software to its maximum capabilities can also help to simplify business tax obligations and ATO lodgement deadlines. Most popular accounting software packages allow you to automate certain processes, saving you time and reducing guesswork around your finances. By leveraging this automation, you can send the necessary tax information directly to the ATO with the click of a button.
Speak with your accountant or advisor to make sure your processes are as efficient as possible, and that you’re getting the most out of your accounting software.
Or alternatively, engage them to administer your business tax obligations for you. This ensures they’re being managed by a professional, who knows what’s needed and can coordinate and submit all the necessary information on your behalf.
Get advice and support from AR & B Advisors
We recognise that with so much complexity involved, and a changing landscape to navigate, staying on top of your tax obligations can be challenging.
And it’s not just about compliance—it’s about protecting your business from unnecessary risk.
At AR&B Advisors, we help growth-minded businesses navigate these changes, ensuring you're proactive, prepared, and never caught off guard. Contact one of our business advisors today to discuss how we can help you—now, and for the future.