When can the ATO issue a default assessment for overdue lodgements

When can the ATO issue a default assessment for overdue lodgements


A default assessment is an assessment of taxable income for overdue tax returns or the net amount or assessable amount-for late activity statements. Although the ATO’s preferred approach is to work with taxpayers to help them meet their lodgement obligations, a default assessment will be issued if this collaborative approach fails.

Penalty
The administrative penalty of 75% of the tax-related liability will be applied for each default assessment issued by the ATO. The penalty increases by 20% for taxpayers who have a pattern of non-compliance and the ATO may also apply for another penalty for failing to lodge on time.

Assessment notice warnings
A warning letter will be sent by the ATO including the details of the default assessment and the date the overdue obligation needs to be lodged by to avoid a default assessment. If you do not receive notice of your default assessment, it will be if there is a risk of:

  • Flight
  • Dilution of assets
  • Movement of funds outside Australia

What you should do if you receive a warning letter
If you receive a warning letter, ensure all overdue obligations are lodged by the date advised in the warning letter. If you are a tax agent, notify your client, immediately, remove the client from your client list if you no longer represent the taxpayer and provide new contact details of the client to the ATO if you possess them.

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If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.


Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.


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