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What Happens If You Don't File Your Tax Returns?

Taxes are an essential part of earning a livelihood. It is your responsibility to get done with tax formalities, by yourself or with the help of a capable accountant. In the case of a small business, you must file your tax return even if your earnings fall below the threshold to pay taxes. The reason is that if you do not file for your tax return, the ATO will assume that you are defaulting on spending your tax obligations. Soon enough, the ATO will catch hold of you and take compliance action to pay the penalty.

If you don't file your tax returns, you will receive default assessment by the ATO, face hefty penalties, and sometimes even face prosecution. Moreover, you will lose out on all the tax return benefits you were liable to receive from the government.

Below are the major repercussions of not filing your tax returns.

Receive Default Assessment by the ATO

The Australian Taxation Office can issue a default assessment for failing to file your taxes. These default assessments can be multiple if the defaulter has not paid the taxes for more than three years. A default assessment is basically an estimate of your income. Usually, it is far more than your actual income and does not include any tax deductibles. So you would be paying a lot more than your actual tax liability.

Facing penalty

Regarding tax penalties, if the defaulting continues, the ATO levies penalties after repeated warnings. This penalty is 75% of the tax amount. So if you owe $1000 to the government, you will now have to pay $1750 and probably more. Notice that the correct tax amount you would have had to pay would probably be $700 or even less in this example. The ATO calculates their default assessment based on existing information that they have and by filing your taxes for you. Therefore this amount is usually way above what you owe.

Facing Prosecution

In rare cases, you can be prosecuted and have to appear in court with regard to your summons by your local court. As you can imagine, this would be a recurring ordeal that will cost additional money to hire a well-qualified lawyer. Also, you can receive imprisonment for up to twelve months.

Not receiving tax return benefits.

The Australian government provides a plethora of tax benefits. There are so many areas of tax deductions that most businesses hire accountants to take care of them. Moreover, you also receive tax relief if your business earns below a notified threshold.

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