The Lodgement Amnesty: A Fresh Start for Small Businesses with Important Considerations

On 9th May 2023, as part of the 2023/24 Budget, the Australian government introduced a significant measure to support small businesses—the lodgement penalty amnesty program.

Designed to encourage businesses to re-engage with the tax system and fulfil their obligations, this amnesty offers a valuable opportunity for small businesses to rectify any outstanding lodgements. While the amnesty provides relief from late lodgement penalties, it is essential to be aware of important considerations, such as personal liability for directors. In this blog, we will explore the lodgement amnesty and shed light on the implications that directors need to keep in mind while taking advantage of this program.

Implications of the lodgement penalty amnesty program

If you have clients with unlodged returns you need to be aware that Treasury aims to claw back $3.8 billion in GST unpaid tax over the next five years by focusing its attention upon compliance.  In this regard, the tax office will receive $588 million in funding for increased GST compliance work.

Understanding the lodgement amnesty

The lodgement amnesty covers various tax obligations, such as income tax and business activity statements, that were originally due between 1st December 2019 and 28th February 2022. By offering an extended timeframe for late lodgements, the amnesty aims to incentivise small businesses to catch up on their outstanding lodgements.

Key dates for the lodgement amnesty

To take advantage of the amnesty, small businesses must lodge their overdue returns between 1st June 2023 and 31st December 2023.

Automatic Remission

During June to December 2023, any failure-to-lodge penalties associated with the late lodgements will be automatically remitted.

It is important to note however that other penalties and general interest charge (GIC) do not form part of this amnesty. GIC may continue to apply to those clients with an existing debt or where they accrue a new debt through their late lodgement. Fortunately, the ATO has stated that it may grant a remission of penalties upon request which it will consider on a case-by-case basis where extenuating circumstances exist.

Eligibility criteria and benefits for small businesses

To be eligible for the lodgement amnesty, a small business must have an aggregated turnover of less than $10 million at the time of lodgement. The amnesty also does not apply to privately owned groups or individuals controlling over $5 million of net wealth. By participating in the program, businesses can not only waive late lodgement penalties but also enhance their financial practices, strengthen compliance strategies, and rebuild trust with stakeholders and potential investors.

Directors personal liability considerations

It is crucial to understand that while the lodgement amnesty provides relief from late lodgement penalties, it does not absolve directors from any personal liability that may arise due to a company’s failure to lodge outstanding returns within three months of their due date. Directors will still be held personally responsible for any such liabilities.

Under the ATO’s lockdown provisions, if the unpaid amount of PAYG withholding or net GST is reported more than three months after the due date (or, in the case of new directors, 30 days after their appointment for unpaid tax), the only way to remit the director penalty is by paying the debt in full. Furthermore, if the amount remains unreported after three months, the corresponding director penalty can only be remitted by payment in full.

The ATO’s compliance team is well funded.  The lodgement amnesty offers a last chance to small businesses to rectify their outstanding tax obligations.  It is essential to take advantage of this opportunity while being aware of the personal liability considerations that directors may face. By staying informed and proactive, small business owners and directors can navigate through this program effectively and safeguard their financial interests. It is advisable to consult with a tax professional or refer to the ATO’s official guidelines for comprehensive information regarding the lodgement amnesty and its associated provisions.

If you or a client need further information, get in touch.