Failure to Lodge Penalties in Australia: How Titan Tax Helps You Reduce ATO Fines (2026 Guide)

Failure to Lodge Penalties in Australia: How Titan Tax Helps You Reduce ATO Fines (2026 Guide)

Receiving an unexpected notice from the Australian Taxation Office (ATO) can be stressful.

A Failure to Lodge (FTL) penalty isn’t a bill for unpaid tax—it’s an administrative fine for not submitting required documents like tax returns or Business Activity Statements (BAS) on time.

The good news? If you have a valid reason for the delay, Titan Tax can help you apply for penalty remission, potentially reducing or eliminating the fine.

This guide explains how these penalties work and provides a clear, step-by-step process to request the ATO to reduce or cancel them.

Key Takeaways

What it is: An FTL penalty is a fine for not lodging tax returns, BAS, or other documents on time
How it’s calculated: Based on penalty units, delay period, and business size
What remission means: ATO may reduce or cancel penalties if you prove a “reasonable excuse”
First step is crucial: You must lodge the outstanding document first
Evidence matters: Strong documentation is essential
Not automatic: The ATO assesses each case individually

What is a Failure to Lodge Penalty?

A Failure to Lodge (FTL) penalty is an administrative fine imposed under the Taxation Administration Act 1953.. It is designed to encourage taxpayers to meet their lodgement deadlines for documents such as:

It applies when you fail to lodge:

Income tax returns
Business Activity Statements (BAS)
Fringe Benefits Tax (FBT) returns
PAYG withholding annual reports

👉 Important: You can still be penalised even if you are due a refund. The penalty is about missing deadlines, not tax payable.

The ATO will issue a formal penalty notice via your myGov account or post, address, clearly stating the penalty amount and which lodgement it relates to. Understanding this notice is the first step before you can apply for a failure to lodge penalty remission. To learn more about how these penalties are calculated, see our detailed guide on the late tax return penalty from the ATO.

How the ATO Calculates Failure to Lodge Penalties

The ATO uses a structured formula to calculate FTL penalties. The amount is determined by two key factors: how late the document is and the size of your entity. This framework ensures the penalty is proportionate.

How late the document is
The size of your business

Penalty Units Explained

1 penalty unit applies for every 28 days (or part thereof) overdue
Maximum penalty = 5 penalty units

👉 Even 1 day late counts as a full 28-day block.

Entity Size Multipliers

Small entities: Individuals and businesses with a turnover under $1 million. The penalty is calculated based on one penalty unit per 28-day period.
Medium entities: Businesses with a turnover from $1 million to less than $20 million. The base penalty amount is doubled.
Large entities: Businesses with a turnover of $20 million or more. The base penalty amount is multiplied by five.

The penalty is capped at a maximum of five penalty units. The table below illustrates the principle.

Days Overdue	Small Entity (Base Penalty Units)	Medium Entity (×2)	Large Entity (×5)
1 – 28 days	1 penalty unit	2 penalty units	5 penalty units
29 – 56 days	2 penalty units	4 penalty units	10 penalty units
57 – 84 days	3 penalty units	6 penalty units	15 penalty units
85 – 112 days	4 penalty units	8 penalty units	20 penalty units
113+ days	5 penalty units (maximum)	10 penalty units	25 penalty units

This means larger businesses face significantly higher penalties for the same delay.

What is Failure to Lodge Penalty Remission?

Failure to lodge penalty remission is the official term for the ATO’s power to reduce or cancel an FTL penalty. It is not an automatic right; it is a discretionary decision made by the ATO when a taxpayer can demonstrate there were extenuating circumstances.

The ATO assesses every remission request on its own merits, considering the facts and evidence you provide.

When Will the ATO Reduce or Cancel Penalties?

To grant remission, the ATO must be satisfied you had a reasonable excuse for the delay. This is a high standard that goes beyond simple forgetfulness or being busy. It refers to circumstances that were genuinely beyond your control, making it practically impossible to lodge on time.

Common grounds for a successful ATO failure to lodge penalty remission include:

Serious illness or accident: A sudden medical crisis affecting you, a close family member, or a key person in your business.
Natural disaster: Events like floods, bushfires, or cyclones that directly impacted your home, business, or access to records.
Loss of a key person: The unexpected death or serious illness of a director or essential staff member responsible for tax compliance.
ATO system issues: If ATO portals or systems were down, preventing you from lodging.
Unforeseen circumstances: Other serious and unexpected events beyond your control.

Your compliance history is also a significant factor. A taxpayer with a clean record is more likely to receive a favourable outcome than one with a history of late lodgements.

The ATO’s power to remit is discretionary. Proving a ‘reasonable excuse’ with solid evidence is crucial. For complex cases, understanding your rights in ATO disputes is vital.

👉 A strong compliance history significantly improves your chances.

How Titan Tax Helps You Request Penalty Remission

Requesting the ATO to waive a penalty is a structured process. Follow these steps carefully to build a compelling case and maximise your chances of a positive outcome.

1. Lodge the Overdue Document First

This is the most critical and non-negotiable step. The ATO will not consider a penalty remission application if the outstanding tax return, BAS, or other report has not been lodged. Lodging demonstrates your commitment to rectifying the situation.

2. Gather Supporting Evidence

Your word is not enough. You must provide clear, verifiable evidence that supports your claim of a reasonable excuse. Examples include:

A doctor’s certificate detailing the nature and dates of an illness.
A statutory declaration outlining the specific circumstances.
Insurance claims or police reports related to a natural disaster or theft.
A death certificate for a key person.
Correspondence from a tax agent if their circumstances caused the delay.

3. Prepare a Strong Written Request

Your request should be concise, honest, and professional. Structure it clearly:

State your purpose: Clearly state you are requesting a remission of a specific FTL penalty.
Explain the circumstances: Provide a timeline of events and explain exactly how these events prevented you from lodging on time.
Reference your evidence: Refer directly to the documents you have attached.
Highlight your compliance history: If you have a good record, mention it.
Outline preventative measures: Briefly explain what you have done to ensure future compliance.

4. Submit the Request

You have three main options for lodging your failure to lodge penalty remission request:

Through a Registered Tax Agent: This is often the most effective method. Agents use dedicated portals and can frame the request professionally.
Online via ATO Portals: You can submit a request through ATO Online services (for individuals via myGov) or Online services for business.
By Mail: You can send a written request to the address specified on your penalty notice, ensuring you attach copies of all evidence.

Worked Example: BAS Penalty Remission

Business: Coastal Cafe Pty Ltd (turnover $800,000)
Situation: BAS lodged 45 days late due to director hospitalisation

Action Taken:

BAS lodged
Medical evidence submitted
Strong compliance history highlighted

Result:
✔ ATO granted full remission and cancelled the penalty

Common Mistakes to Avoid

❌ Applying before lodging
✔ Always lodge first

❌ Giving vague excuses
✔ Provide clear, documented reasons

❌ Blaming your accountant
✔ You remain responsible

❌ No prevention plan
✔ Show improvements

Remission Request Checklist

✔ Lodgement completed

✔ Penalty notice included

✔ Clear explanation provided

✔ Evidence attached

✔ Compliance history mentioned

✔ Preventative steps outlined

✔ Contact details correct

Frequently Asked Questions

What is the difference between remission and objection?

Remission: Request to reduce penalty
Objection: Legal challenge if applied incorrectly

How long do I have to apply?

There’s no strict deadline, but you should apply as soon as possible after lodging.

Will the ATO waive first-time penalties?

Often yes, especially with a valid reason and good compliance history.

Can I get a penalty if I’m due a refund?

Yes, although it is less common. Lodgement obligations still apply.

What happens if I ignore the penalty?

The ATO may:

Apply interest charges
Begin recovery action
Garnish wages or bank accounts

Does remission remove interest charges?

No. Interest (GIC) is separate and requires a separate request.

What if my request is denied?

You can lodge a formal objection, which is a more complex legal process.

How much are ATO penalty units?

Penalty unit values are updated regularly. Always check the latest ATO rates.

Final Thoughts

Failure to Lodge penalties can be costly—but they are often reducible or avoidable.

To improve your chances:

Lodge on time
Act quickly if delayed
Provide strong evidence
Seek professional support

Contact Titan Tax for Expert Assistance

If you’ve received an ATO penalty, Titan Tax can help you reduce or eliminate it.

📞 Phone: 0457 696 620
🌐 Website: https://titantax.com.au/

📧 Email: info@titantax.com.au

📍 Address: Unit 14, 164 Government Road, Richlands QLD 4070, Australia

👉 Get in touch today and let Titan Tax handle your ATO issues professionally.