In 2021 Tax Tips

It is tax time again, and many people wonder whether they need to lodge a tax return.  To help you decide if lodging a tax return is for you, here are three questions that will help you answer whether I need to lodge a tax return?  

The first question is, “Do I have income?” If your only income was from government benefits or a salary lower than $18,200, then it’s unlikely that you will need to lodge.  

The second question is, “Was my taxable income greater than zero?” 

If the answer is yes, then it’s likely that there may be some benefit in lodging.  Finally, ask yourself one last question: “Am I expecting any significant change in my circumstances over the next year.

If you are unsure if you need to lodge a tax return, this article will go through some factors that may affect your situation. 

It is important to get advice from an accountant or specialist before making any decisions. 

The Australian Taxation Office has general guidelines for whether or not to lodge a tax return, but these are guidelines only, and there are exceptions in every case. 

Suppose you have received foreign income while living in Australia, received certain capital gains, had substantial business deductions, or made large contributions to superannuation funds. In that case, you will likely need to lodge a return. 

Read on for more information about these different situations and how they can affect your eligibility for lodging a tax return with the ATO. 

Lodge and pay tax

Your business must lodge a tax return each year, and you may need to lodge business activity statements more regularly. How you lodge your tax will depend on your business structure. Find out how to lodge returns and your options for paying tax.

1. Check the tax return requirements for your business type

Your business must lodge a tax return each year, even if you record a loss or don’t meet the tax threshold. When lodging your return, make sure you know the rules that apply to your business structure:

  • Sole trader – Lodge an individual tax return. Include all your business income on your tax return using a separate business schedule. You don’t need to lodge a separate tax return for your business.
  • Partnership – Your partnership has its tax file number (TFN) but doesn’t pay income tax on the profit it earns. Instead, each partner reports their share of the partnership income in their tax return. Your partnership must also lodge a separate partnership return under its TFN.
  • Company – A company is a separate legal entity. You must lodge a company tax return and pay tax on the company’s income. If you’re a director, you’ll still need to lodge your return as well.
  • Trust – A trust has its TFN and must lodge a trust income tax return.

If you run a not-for-profit (NFP) organisation, you may be eligible for tax concessions. Read a summary of tax concessions for NFP organisations on the Australian Taxation Office (ATO) website.

2. Understand business activity statements requirements

When you register for an Australian business number (ABN) and GST, the ATO will automatically send you a business activity statement (BAS) when it is time to lodge. 

Your BAS allows you to report and pay for certain taxes, including:

You have several options for lodging your BAS; however, most businesses that lodge their own BAS choose an online option.

Single Touch Payroll

If you have employees or other payees, you may be required to use Single Touch Payroll (STP) reporting. STP is a new way of reporting tax and superannuation information to the ATO.

It sends your tax and super information from your payroll or accounting software to the ATO as you run your payroll.

Find out more about STP.

3. Find out when you need to lodge by

Unless you lodge through a registered tax agent, tax returns are due by 31 October for:

  • sole traders
  • partnerships
  • trusts.

Company returns for self-preparers are generally due by 28 February. If you lodge through a registered tax agent, they’ll tell you when they will lodge your tax return.

BAS due dates are different – they can be quarterly or monthly. 

4. Lodge your tax return or BAS

Depending on how complex your business and taxes are, you may lodge your return or get a professional to lodge it for you.

You can lodge your tax return:

  • with a registered tax agent
  • online with myTax if you’re a sole trader
  • with standard business reporting enabled software if you’re a company, trust or partnership
  • by paper.

You can lodge your BAS:

  • through a registered tax or BAS agent
  • online (online services in myGov, the business portal or SBR-enabled software)
  • by phone (for nil BAS statements only)
  • by mail.

If you use a tax or BAS agent, make sure they’re registered with the Tax Practitioners Board (TPB). To check if they’re registered, search for them in the TPB register.

5. Pay your taxes

The ATO has a range of self-service tools and online services to help you manage your tax.

You can pay with BPAY or a credit/debit card. 

If you’re worried you won’t be able to lodge or pay on time, contact the ATO for guidance. The ATO can provide information that may help you manage your tax.

Why do you need to lodge a tax return? 2021

Coins-pen-bills

If any of the following reasons applies to you, you must lodge a tax return.

Reason 1

During 2020–21, you were an Australian resident, and you:

  • paid tax under the pay as you go (PAYG) withholding or instalment system, or
  • had tax withheld from payments made to you (excluding mining payments).

Reason 2

You were eligible for the seniors and pensioners tax offset, and your rebate income (not including your spouses) was more than:

  • $32,279 if you were single, widowed or separated at any time during the year
  • $31,279 if you had a spouse, but one of you lived in a nursing home, or you had to live apart due to illness (see the definition of Had to live apart due to illness in T1 Seniors and pensioners (includes self-funded retirees) 2021), or
  • $28,974 if you lived with your spouse for the full year.

To work out your rebate income, see Rebate income 2021.

Reason 3

You were not eligible for the seniors and pensioners tax offset, but you received a payment listed at question 5, and your taxable income (from taxable income or loss on your tax return) was more than $21,884.

Reason 4

You were not eligible for the seniors and pensioners tax offset, and you did not receive a payment listed at question 5 or question 6, but your taxable income was more than:

  • $18,200 if you were an Australian resident for tax purposes for the full year (see the meaning of Australian resident for tax purposes in Special circumstances and glossary)
  • $416 if you were under 18 years old at 30 June 2021 and your income was not salary or wages
  • $1 if you were a foreign resident and you had income taxable in Australia which did not have a final non-resident withholding tax withheld from it, or
  • your part-year tax-free threshold amount if you became or stopped being an Australian resident for tax purposes; see question A2 or phone 13 28 61.

Other reasons

You must lodge a tax return if any of the following apply to you:

  • You had a reportable fringe benefits amount on your
    • Income statement or PAYG payment summary – individual non-business, or
    • Income statement or PAYG payment summary – foreign employment.
  •  
  • You had reportable employer superannuation contributions on your
    • Income statement or PAYG payment summary – individual non-business
    • Income statement or PAYG payment summary – foreign employment, or
    • Income statement or PAYG payment summary – business and personal services income.
  •  
  • You were entitled to the private health insurance rebate, but you did not claim you’re correct entitlement as a premium reduction, and your spouse (if you had one) is not claiming the rebate for you in their income tax return.
  • You carried on a business.
  • You made a loss (including a capital loss or a non-capital loss on redemption or disposal of traditional security), or you can claim such a loss you made in a previous year.
  • You were 60 years old or older. You received an Australian superannuation lump sum that included an untaxed element of a superannuation lump sum death benefit paid to you as a non-dependant.
  • You were under 60 years old, and you received an Australian superannuation lump sum that included a taxed element or an untaxed element, or it is a superannuation lump sum death benefit paid to you as a non-dependant.
  • You were entitled to a distribution from a trust, or you had an interest in a partnership, and the trustor partnership carried on a business of primary production.
  • You were an Australian resident for tax purposes, and you had exempt foreign employment income and $1 or more of other income.
  • You are a special professional covered by the income averaging provisions. These provisions apply to authors of literary, dramatic, musical or artistic works, inventors, performing artists, production associates and active sportspeople.
  • You received income from dividends or distributions exceeding $18,200 (or $416 if you were under 18 years old on 30 June 2021), and you had
    • franking credits attached, or
    • amounts withheld because you did not quote your tax file number or Australian business number to the investment body.
  •  
  • You derived Australian sourced taxable income (excluding any superannuation remainder or employment termination remainder) of $45,001 or more while you were on a working holiday visa (417 or 462 visas).
  • You made personal contributions (not including amounts that you are claiming as a deduction) to a complying superannuation fund or retirement savings account and will be eligible to receive a super co-contribution for these contributions.
  • Your concessional contributions to your super exceeded the concessional contributions cap.
  • Your non-concessional contributions exceeded your non-concessional contributions cap.
  • You were a liable parent or a recipient parent under a child support assessment unless
    • you received one or more Australian Government allowances, pensions or payments for the whole of the period 1 July 2020 to 30 June 2021
    • the total of all the following payments was less than $26,319

Deceased estate

If you are looking after the estate of someone who died during 2020–21, consider all the above reasons on their behalf. If a tax return is not required, complete the Non-lodgment advice 2021 form and send it to us.

If a tax return is required, see Completing individual information on your tax return 2021 for more information.

Foreign residents with an accumulated Higher Education Loan Programme (HELP) debt, VET Student Loan (VSL) debt or an accumulated Trade Support Loan (TSL) debt

If you were a foreign resident during 2020–21 and you had an accumulated HELP, VSL or TSL debt on 1 June 2019, then you must lodge a tax return if the total of:

was more than $11,655 for 2020–21.

If this applies to you, you must lodge your tax return electronically. This is even if one of the other reasons above applies to you.

Franking credits

Suppose you received franking credits, and you don’t need to lodge a tax return for 2020–21. In that case, you may be eligible to claim a refund of franking credits by using Refund of franking credits instructions and application for individuals 2021 (NAT 4105) and lodging your claim online, by mail, or by phone on 13 28 65.

Non-lodgment advice

If you have read all the above information and know that you do not have to lodge a tax return, you should complete the Non-lodgment advice 2021 and send it to us, unless one of the following applies to you:

  • You have already sent us a tax return, non-lodgment advice, form or letter telling us that you do not need to lodge a tax return for all future years.
  • You are lodging an application for a refund of franking credits for 2021.
  • Your only income was from an allowance or payment listed at question 5, or you received a pension, payment or an allowance listed at question 6. Therefore, 
    • your rebate income was less than or equal to the relevant amount in reason 2 (if you are eligible for the seniors and pensioners tax offset), or
    • your taxable income was less than or equal to the relevant amount in reason 3 (the agencies that paid you have provided information for us to determine that you do not need to lodge a tax return)
  • You were a working holidaymaker on a 417 or 462 visa, and your Australian income was less than $45,001.

You can submit Non-lodgment advice for 2021 using our online services.

What Happens If You Don’t Lodge A Tax Return?

If you earn more than the tax-free threshold, which currently stands at $18,200, you’re required to lodge a tax return. In some cases, you may even be required to lodge if you earn less than that amount – we can help you determine whether you’re required to lodge, so if you haven’t lodged a tax return, it’s not too late.

Generally, you need to lodge an income tax return every year. However, for a long list of reasons – too busy, overseas, or found that it was just too complicated – you may not have got around to it. So if you haven’t lodged a tax return for a few years or you have one outstanding or overdue – no matter your reason – get up to date for peace of mind.

If you don’t lodge, the ATO can apply several sanctions and penalties to force you to lodge or penalise you for lodging late. Our tax consultants can help you with all your neglected returns, call 13 23 25 or find your nearest office today and book an appointment.

What if I don’t need to lodge a tax return?

If you earned less than $18,200 and didn’t pay any tax, you may not be required to lodge a tax return. However, it’s important to submit non-lodgement advice to the ATO, which explains that you don’t need to lodge and ensures they don’t list you as having an outstanding return. 

Without non-lodgment advice, the ATO will assume you need to lodge and may take compliance action to force you to. We can prepare and lodge your non-lodgement advice.

What’s the fine if I don’t lodge a tax return?

The ATO will issue you a Failure To Lodge (FTL) penalty if your tax return isn’t lodged by the due date. This fine is calculated at the rate of one penalty unit for each period of 28 days or part thereof that the document is overdue, up to a maximum of five penalty units.  The value of a penalty unit is currently $222, which makes the maximum penalty that can be applied for an individual – $1,110.

The penalty is normally applied automatically but is not normally applied to returns with either a nil result or which generate a refund. Where a penalty is applied, the ATO will sometimes remit it where it’s ‘fair and reasonable to do so,’ such as in the event of a natural disaster or serious illness.

Are there penalties for lodging a late tax return?

Where penalties have failed to get you to lodge a return, especially with several years outstanding, the ATO can issue you with one or more default assessments. This is an estimated assessment of your income based on data held by the ATO.

As these are estimates, they’re rarely correct and often show a higher tax liability than you would owe as they don’t take deductions into account. You’re able to appeal a default assessment. However, you must be able to show what your actual tax liability is. Simply arguing that the ATO’s figures aren’t correct isn’t enough.  

Will I get prosecuted if I don’t lodge a tax return?

Even though it’s not common, the ATO can and does prosecute for failing to lodge tax returns.  The maximum penalty applied on prosecution is now $9,000 or imprisonment for up to 12 months.

Will I get audited if I don’t lodge a tax return?

If you lodge late, it’s widely believed you’re at increased risk of being reviewed or audited by the ATO

What should I do if I haven’t lodged my tax return?

If you’ve got one or more tax returns outstanding, the ATO will catch up with you. Take pre-emptive measures against this and get your tax returns up to date ASAP. 

We make the catching-up process as painless as possible. Where there is a possibility penalties can be remitted, we’ll make a case on your behalf to the ATO.

If you have missing income information, we can often fill in the gaps by obtaining pre-filled information sent to the ATO by third parties such as banks and employers. In addition, we’ll work with you to establish what you can claim when you haven’t kept records of deductions.

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