In the 2016-17 Federal Budget, the Government announced that it would increase administrative penalties imposed on ‘Significant Global Entities’ (SGE). SGEs are entities that are part of a group with a worldwide income of AUD$1 billion or more annually. These measures form part of the Government’s Tax Integrity Package, which seeks to strengthen the integrity of Australia’s tax system.
On 20 December 2016, the Government released the Exposure Draft to the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 (Exposure Draft). The Exposure Draft seeks to increase the failure to lodge on time penalty (FTL Penalty) and penalties relating to making false and misleading statements for SGEs.
Separately, the Government stated in the 2016-17 Mid-Year Economic and Fiscal Outlook (MYEFO) announcement that with effect from 1 July 2017 the value of the Commonwealth penalty unit will increase from $180 to $210. The value will be indexed every 3 years in line with the CPI with the first indexation occurring on 1 July 2020. The following comments are based on the value of the new penalty unit (i.e. $210).
Failure to Lodge on Time Penalty
The Government is proposing to increase the FTL Penalty for SGEs to 500 times the base penalty amount.
Generally, these penalties apply to the late lodgement of ‘approved forms’ which include the following:
- activity statements;
- income tax returns;
- fringe benefits tax return;
- pay as you go (PAYG) withholding annual report;
- annual goods and services tax (GST) return;
- annual GST information report; and
- taxable payment annual report.
The impact of the proposed changes is outlined in the table below:
Click here to view table.
Importantly, the FTL Penalty applies to the requirement to lodge each approved form. Therefore, if multiple approved forms are not lodged on time an FTL Penalty can be applied in respect of each of those approved forms.
These amendments apply in relation to an entity’s failure to give an ‘approved form’ to the Commissioner where that form is required to be given on or after the later of 1 July 2017 and the day the relevant Act receives the Royal Assent.
Penalties relating to statements and failings to give documents
Administrative penalties may also be imposed in relation to:
- making a false or misleading statement,
- making a statement which treats a law as applying in a way that was not reasonably arguable; and
- failing to give the Commissioner a document on time, where the document is necessary to determine a tax-related liability accurately.
These penalties will be doubled for SGEs. The impact of the proposed changes are outlined in the table below.
Click here to view table.
The amendments apply in relation to:
- statements made after the later of 1 July 2017 and the day the relevant Act receives the Royal Assent; and
- returns, notices or other documents required to be given after the later of 1 July 2017 and the day the relevant Act receives the Royal Assent.
The current policy of the ATO to administering the FTL Penalty is contained in PSLA 2011/19.
The ATO has also included comments on the proposed increased in penalties for SGEs on the ATO website.
Broadly,the ATO has stated that its current approach for the imposition and remission of statement penalties and the FTL Penalty will be maintained for the increased penalties applying to SGEs. That is, the increased amount of penalties will not by itself be a relevant factor in considering whether or not a penalty should be remitted.