Tax Talk: How To Catch Up On Previous Year’s Tax Lodgements?
Catching up on overdue tax returns can be a daunting task, especially if you are significantly behind, such as over ten years (as we have seen in a handful of cases). This guide will provide a structured approach to tackling overdue returns, addressing both general scenarios and specific considerations for those who have not lodged for an extended period.
- Understanding the Importance of Compliance
The first step in addressing overdue tax returns is understanding the importance of compliance. Lodging tax returns is not only a legal requirement but also crucial for maintaining your eligibility for future loans, government benefits, and ensuring you are correctly assessed for any refunds or taxes owed. The longer you delay, the higher the risk of penalties and interest charges, which can accumulate to substantial amounts.
- Assessing Your Situation
Begin by assessing how many years of returns are overdue and gathering any notices or communications from the Australian Taxation Office (ATO). If you are over ten years overdue, it’s crucial to prioritise this task as you may be at risk of more severe penalties or legal action.
- Gathering Documentation
Collect all necessary financial documents for each overdue year. This includes payment summaries, bank statements, receipts for deductions, and any other relevant financial records. If some documents are missing, you may need to reconstruct these records from other sources, such as requesting historical statements from your bank or contacting previous employers for old payment summaries. More recently, the government has implemented single touch payroll from 1 July 2018 so you may not need payment summaries from your employers after this date.
- Consulting a Tax Professional
Given the complexity and potential legal implications of lodging multiple overdue returns, especially if over ten years, consulting a registered tax agent is advisable. Tax professionals can provide valuable guidance, help minimise liabilities, and negotiate with the ATO on your behalf. They can also assist in applying for any discretion the ATO may have to waive penalties under certain circumstances, such as serious hardship or genuine ignorance of tax obligations.
- Lodging Overdue Returns
Start lodging your returns from the oldest to the most recent. This sequential approach helps in understanding the cumulative impact of any taxes owed or refunds due over the years. If you’re using a tax agent, they can manage this process for you, ensuring that each return is accurately completed and lodged.
- Dealing with Penalties and Charges
The ATO may impose penalties and interest charges on overdue returns. However, if you voluntarily disclose your overdue returns before any audit or other compliance actions are started against you, the ATO may reduce these penalties. In cases of severe delay, such as over ten years, demonstrating a proactive approach and willingness to rectify your tax affairs can be particularly important in mitigating penalties.
- Payment Arrangements
If you owe tax and cannot pay in full, you might be eligible to enter a payment plan with the ATO. This allows you to pay your tax debt in instalments, making it more manageable financially. It is important to approach the ATO early and discuss your situation openly to negotiate a feasible payment plan.
- Preventing Future Issues
Once your overdue returns are up to date, take proactive steps to avoid falling behind again. This can include setting reminders for tax deadlines, maintaining organised records throughout the year, or engaging a tax professional to handle your tax affairs regularly.
- Special Considerations for Long-term Non-lodgement
If you haven’t lodged a return in over ten years, the ATO may require additional verification and detailed documentation to process your returns. In some cases, the ATO might also investigate the reasons for the prolonged non-lodgement, so be prepared to provide a detailed explanation and any supporting evidence.
- Utilising Support Services
Remember, you do not have to manage this process alone. Apart from tax professionals, there are community programs and services that can offer support and guidance. The National Tax Clinic program, for example, provides free tax advice to eligible individuals facing tax problems without the means to pay for professional advice.
Conclusion
Catching up on overdue tax returns, particularly if they span over a decade, can significantly relieve financial and psychological burdens. It restores your standing with the ATO, helps avoid escalating penalties, and ensures you are assessed correctly for taxes and entitlements. Always consider seeking professional advice to navigate this complex process effectively and ensure compliance with Australian tax laws. if you need an Accountant or Tax Agent, please feel free to [Contact Us Here] today.
Disclaimer
Please note, this article does not take into consideration your specific objectives, financial situation or needs and is to be taken and read as general information only. Tax Stuff Pty Ltd does not accept liability for any use of this information, before acting on any information contained in this article, please consult with a registered tax agent taking into consideration your specific circumstances.
