27/11/2008

For most SME owners, lodging their BAS returns on time is just plain administrative nuisance.  Many are so busy dealing with day-to-day operations of their business that finding time to lodge their BAS returns is not on their list of priorities.  So what happens if you lodge your BAS returns late?

The ATO takes a hard-line strategy of pursuing tax offenders who lodge their BAS even a day late.  Section 8C(1)(a) of the Taxation Administration Act 1953 (Cth) provides that a person who refuses or fails to lodge BAS or tax returns as required is guilty of an absolute-liability offence.  It doesn’t look too pretty to be sitting on ATO’s bad-book because once you’re found guilty of an absolute-liability offence, you have no way of arguing your way out of not having lodged your BAS returns on time.  This will then lead you to a subsequent conviction under the Crimes Act 1914 (Cth). Hence it becomes a question of how much you will be required to pay, rather than whether you will have to pay. 

The Commissioner of Taxation will commence court proceedings against the offender in the relevant state courts by issuing a Complaint and Summons to the offender who must then appear before that court.  The ATO will then pursue an FTL (Failure to Lodge) penalty amount, which is determined by factors such as the length of time the document was overdue and/or whether the offender was aware of their lodgment obligation and the consequences of not meeting that obligation. 

The court will consider mitigating factors in failing to lodge BAS returns on time as well as the impact of the penalty on the offender in order to determine the amount of penalty, although they do not seem to show any reluctance against not imposing a criminal conviction.  We recently acted for a client who had more than 30 accounts of failure to lodge their BAS returns, facing more than $500,000 in penalties.  We managed to reduce this penalty down to a mere $5,000 but only because he had a very good reason for the delay.  However, our client was unable to escape criminal conviction because of the absolute-liability nature of the offence.

The ATO likes to score recorded convictions.  It looks good in the statistics in their parliamentary report.  The bottom-line is to lodge your BAS on time because the ATO won’t hesitate to prosecute.

For professional legal advice on how to minimise penalties sought or the likelihood of defending the charges, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.