Late Lodgement Penalties: What They Cost and How to Avoid Them

The deadline came and went, and your tax return still is not in. Now there is a letter from the ATO, or worse, no letter yet, just a growing feeling that something is about to cost you money.

Late lodgement penalties in Australia are more common than people think, and they are also more avoidable than people realise. This guide explains what the failure to lodge penalty actually costs, how the ATO calculates it, and what you can do right now if you are already overdue.

What Is a Failure to Lodge Penalty?

The ATO calls this the failure to lodge on time penalty, usually shortened to FTL. It applies when a tax return, activity statement, or other required document is not lodged by its due date.

For most individuals, the deadline to self-lodge a tax return is 31 October. If you use a registered tax agent, you may be eligible for an extended due date, but only if you were on that agent’s client list before 31 October and you do not have any earlier tax returns still outstanding.

The FTL penalty is not applied the moment you are a day late. The ATO generally warns you by phone or in writing before issuing a penalty, and gives you the chance to lodge or explain your circumstances first.

How the Penalty Is Calculated

The base penalty is measured in penalty units, and one penalty unit currently sits at $364. The ATO applies one penalty unit for every 28 days, or part of a 28 day period, that your document remains overdue, up to a maximum of five penalty units.

For an individual or a small entity, that works out like this.

1. One to 28 days overdue: one penalty unit, currently $364
2. 29 to 56 days overdue: two penalty units, currently $728
3. 57 to 84 days overdue: three penalty units, currently $1,092
4. 85 to 112 days overdue: four penalty units, currently $1,456
5. 113 days or more overdue: five penalty units, the maximum, currently $1,820

Larger entities face higher multiples of the base penalty depending on turnover, so a business well above the small entity threshold can face a considerably larger maximum.

Interest on Top of the Penalty

If your late lodgement also results in unpaid tax, the General Interest Charge applies on top of the FTL penalty. GIC is a separate charge calculated daily on the outstanding amount, and the rate changes every quarter.

This is where things escalate quickly. The FTL penalty is fixed once it reaches its maximum, but GIC keeps compounding for as long as the debt sits unpaid. A modest tax bill left unaddressed for months can end up costing far more in interest than the original penalty.

Since 1 July 2025, GIC can no longer be claimed as a tax deduction. That change makes the cost of delay higher than it used to be, even before the penalty itself is considered.

When the ATO Generally Does Not Charge a Penalty

There is some relief built into the system that a lot of people do not know about.

Generally, the ATO will not issue an FTL penalty for a late tax return, FBT return, annual GST return, or activity statement if the lodgement results in a refund or a nil outcome. This does not apply in every case though. It does not cover situations where a penalty was already applied before you lodged, where the overdue document is a third party data report, or where you are classified as a large withholder.

Because this exception does not apply automatically or in every circumstance, the safest approach is always to lodge as soon as you can, rather than assuming a refund outcome will protect you.

What to Do If You Are Already Overdue

The instinct to wait until everything is perfect before lodging is the single biggest mistake people make once they fall behind.

Lodge the overdue return or statement first, even if you cannot pay any resulting tax bill straight away. The ATO treats the FTL penalty and the underlying tax debt as separate issues, and lodging promptly demonstrates good faith. Voluntary lodgement, before the ATO issues a formal notice, generally puts you in a stronger position than waiting to be chased.

Once the document is lodged, you can then look at your options for the debt itself, such as a payment plan, separately from the lodgement issue.

Requesting a Remission of the Penalty

If you have already been issued an FTL penalty, you can ask the ATO to remit it, meaning reduce or cancel it, if there were genuine circumstances that prevented you from lodging on time.

The ATO updated its remission process in January 2026, and formal applications are now required for all requests. The outstanding document needs to be lodged first, since the ATO will not consider a remission request until that has happened. Supporting evidence helps your case, such as medical certificates, financial records, or documentation relating to a disaster or serious personal circumstance.

There is no guarantee of remission, and the ATO decides based on your specific circumstances, but it is always worth requesting if you had a genuine reason for the delay.

Why Getting Ahead of This Matters

The pattern we see most often is not one missed deadline, it is a small gap that turns into several years of overdue returns because the first one felt too hard to catch up on.

Every additional year that goes unlodged adds its own penalty exposure and its own GIC calculation, and it also means the ATO has less confidence in your overall compliance history. Getting back on track is always easier the earlier you start, even if that means lodging one overdue return before tackling the next.

If a mistake in an already lodged return is part of what is holding you back from catching up, our guide on how to amend a tax return covers that process separately. And if the ATO has already been in contact about overdue lodgements, our guide on what happens during an ATO audit explains what that escalation can look like.

At ABBS Tax, catching up on overdue lodgements is something our team handles regularly for clients across Brisbane and Logan, working through however many years need to be brought up to date, one return at a time.

Need help with late lodgement penalties or catching up on overdue returns? ABBS Tax handles individual and sole trader tax returns for clients across Brisbane and Logan. Get in touch and we will work out the fastest way to get you compliant.

This article is general information only, not tax advice. Speak to a tax professional about your specific situation.