The Law Handbook 2024

402 Section 5: Managing your money Intentional disregard The Tax Commissioner considers that you intentionally disregard the law if you are fully aware of the offence and you choose tomake it anyway with the intention of bringing about certain results (e.g. underpaying tax or over-claiming an entitlement). This type of behaviour triggers the highest penalties among the offences. Recklessness The Tax Commissioner considers that recklessness arises where there is a high degree of carelessness, including disregard of, or indifference to, risks that are foreseeable by a reasonable person. Lack of reasonable care The reasonable care test requires a taxpayer to take the same degree of care in fulfilling their tax obligations as could be expected of a reasonable ordinary person in their circumstances. Where you are regarded as having tried your best, no penalty should be imposed. Reasonably arguable A matter is ‘reasonably arguable’ if what is argued for is as likely to be correct as incorrect, or is more likely to be correct than incorrect. Therefore, there must be a substantial prospect that your interpretation of the relevant provision would be upheld by a court. No penalty will be imposed for this offence, unless the tax shortfall is greater than $10000 or one per cent of the tax payable on the basis of the return you lodged. Specific penalty provisions also exist if you are involved in a tax avoidance scheme. Promoter penalties The promotion of tax avoidance and tax evasion schemes is prohibited. This activity can be penalised with civil penalties of up to 5000 penalty units for an individual, or 25 000 penalty units for an owners corporation, or more depending on the benefits received by the promoter and their associates. As part of the Federal Government’s response to the PwC tax leaks scandal, it introduced legislation to amend the Taxation Administration Act 1953 (‘ TA Act ’) to increase the time the ATO has to bring an application for civil penalty proceedings to the Federal Court of Australia, increase the maximum penalty applicable, and expand the application of the promoter penalty laws. The legislation has been referred to the Senate Economics Legislation Committee, with a report due by 18 April 2024. NOTE: PENALTY UNITS The value of one Commonwealth penalty unit is $313. For more information, see ‘A note about penalty units’ at the start of this book. Offences In addition to the penalties listed above, a range of criminal offences may be imposed instead of the penalties referred to in the previous sections. Maximum penalties range from a fine between $4440 (for a first offence) and $26640, and/or two years’ imprisonment, for individuals. Fines may be up to five times higher in the case of companies and company officers may be personally liable for the tax offences of the company. Further, the court has the power to order a penalty of up to three times the amount of tax that was sought to be avoided. Objections, reviews and appeals How long do I have to lodge an objection? Objecting to a notice of assessment People and organisations have set timeframes for lodging an objection to a notice of assessment after receiving the notice: • individuals generally have two years to lodge an objection with the ATO; • small businesses (i.e. with a turnover of less than $10 million) have two years to lodge an objection with the ATO; • medium businesses (i.e. with a turnover between $10–$50 million) have two years to lodge an objection with the ATO; • individuals who carry on a business that is not a small business, are a partner in a partnership, or are a beneficiary of a trust that is not a small business have four years in which to lodge an objection with the ATO, depending on the circumstances. These periods may be extended.