The quick answer
Getting up to date is the way out. The ATO says to do it as soon as possible, to reduce the risk of penalties and interest.
Some of those years may end in a refund. If tax was taken from your pay, a refund for that year stays with the ATO until the return is lodged.
If you wait, the ATO can work out your income without you. That is called a default assessment, and a penalty may be added to it.
The harder part: knowing which years need a return at all, and finding the records for each one.
The ATO doesn’t forget the years you missed
A year you were required to lodge stays outstanding until it is dealt with. It generally doesn’t drop off with time. The ATO receives information from employers, banks and government agencies, so it generally has a picture of your income even where nothing has been lodged.
Its message on overdue returns is direct:
“it’s important to get up to date as soon as possible to reduce the risk of penalties and interest”Australian Taxation Office, Lodge a prior year tax return
If nothing is lodged, the ATO can take firmer action. It may issue a default assessment, which is its own estimate of your taxable income, made without your input.
A penalty may be added to that assessment. Before it is issued, the ATO sends a warning letter with a date to lodge by.
Two people, same missed years, different outcome
Two people each have several years outstanding. One lodges before the ATO takes action. The other waits, receives the ATO’s estimate, and has a bill and a penalty to deal with.
The difference comes down to timing, how much tax was taken from their pay in those years, what other income they had, and whether the returns went in before or after the ATO stepped in.
Six questions that decide what happens next
QUESTION 1
Which years do you need to lodge?
Not every year needs a full return. For a year that doesn’t, the ATO usually still expects to be told.
QUESTION 2
What income did you have in each year?
Wages, bank interest, government payments, investments and any work under an ABN are looked at year by year.
QUESTION 3
What records can still be found?
Much of what employers and banks reported may still be available. Deductions rely on what you kept.
QUESTION 4
Is each year a refund or a bill?
The answer can be different for each year, and a refund may be applied against an amount owing.
QUESTION 5
Has the ATO already contacted you?
A reminder, a final notice and a warning letter each mean something different, and each one has a date on it.
QUESTION 6
What if you can’t pay straight away?
Lodging and paying are separate steps. There may be options for paying an amount over time.
There is no single answer to any of these. Each one depends on your own situation. Working them out is what we do every day.
What getting it wrong can cost
A penalty for lodging late, which can grow the longer a return stays outstanding.
The ATO’s own estimate of your income, with a further penalty that may be added to it.
Refunds you can’t receive, because the ATO may hold a refund until outstanding returns are lodged.
Interest on any amount owing, and in serious cases, court action.
Does this sound like you?
I haven’t lodged for two years or more.
I don’t know which years I missed.
I’ve lost my payslips and receipts.
I’m worried about what I might owe.
I received a letter or message from the ATO.
I had more than one job, or some ABN work.
I’d rather have someone else sort it out.
If even one of these is you, it’s worth a quick conversation. Sorting it out early is almost always easier than fixing it after the ATO gets in touch.
Common questions
Will I get a penalty?
It depends on your circumstances: how late the returns are, whether each year ends in a refund or a bill, and whether the ATO has already asked you to lodge. The ATO can also reduce a penalty in some cases. We look at your position and tell you what to expect before anything is lodged.
I don’t have my records. Can the returns still be done?
Often, yes. As a registered tax agent we can generally see what was reported to the ATO for each year, such as wages and bank interest. Deductions depend on the records you still have.
How many years back do I have to go?
Each year you were required to lodge generally remains outstanding. We check which years the ATO is expecting from you, and which of those need a full return.
How much does it cost?
It depends on your situation, so we give you the fee before any work starts. Asking for a quote costs nothing.
