Have you failed to send in a tax return for any year since 2000? If the answer is yes — even if you were at school at the time — watch out. The Tax Office may send you a letter threatening to fine you thousands of dollars or throw you in prison if you don’t file it right away.
But don’t panic. While the letter is not a scam, the Tax Office is trying it on in some cases and appears to have misrepresented the penalties. Crikey understands the ATO has new targets to reach on non-lodgement of returns. So read on to beat the taxman’s fishing trip for revenue.
In response to a tip, Crikey has heard from people all around the country who have received the letter. Some are upset or stressed. The letter says you’ve missed a tax return, names the years, and threatens you with a fine of up to $4250 — charged at interest of 9.59% per day — if you don’t “lodge immediately”. If convicted for failure to lodge, you could be “imprisoned for up to 12 months”.
While plenty of people who’ve got the letter probably did the wrong thing, may owe the ATO money and are ripping off society, some are being unfairly targeted. Some were aged 14-18 for the year in question and earned little or no income. Others were overseas. Some were never supposed to file a tax return.
The ATO is targeting lawyers and people with a role in the taxation system.
Here’s the letter sent to a reader, H. He missed tax returns for 2003, 2004 and 2005 — when he was in years 10 to 12, and earned no or little income. H rang the ATO and was told he must perform a “self-assessment”. “I wonder whether their time would be better spent chasing real tax evaders and cheats, rather than high school students,” H told Crikey.
We’ve also heard from:
- Beth got the letter for 2004, when she was 18, in education and had no taxable income;
- J has been ordered to file tax returns for two years more than a decade ago, when she lived overseas with a newborn;
- D got the letter relating to a financial year a decade ago. He was 14;
- Jenna from Perth was told to file a return for 2001 and 2002, when she was aged 14-16, at school and not working;
- S recently got the letter for failing to lodge a return for 2012-13. “According to my agent the return isn’t even required until May,” she told Crikey. “I suspect this is the ATO’s new model of customer service under an Abbott government … it sounds like a scam all right — a government-initiated one.”; and
- Alex, a lawyer, knows of 11 young lawyers who’ve got the letter, relating to about a decade ago. This was causing anxiety because a prosecution could end their careers.
Crikey tax expert Chris Seage says the letter is very strongly worded. “They should only be using those letters on taxpayers that are high-risk and high-wealth,” he said. Seage says if the letter is going to people for whom the ATO has no current, accurate evidence pointing to wrongdoing, then it’s bullying. Seage says the $4250 fine threatened in the letter is only for large corporations, not for individuals; “that letter is factually wrong.”
If you earned no income, you don’t have to file a return. If you earned under the tax-free threshold ($6000 until recently), you may have to.
NSW accountant Dianne Costin thinks the ATO is combing its files to target missing returns, some from a long time ago. “It can be really stressful for a lot of people,” said Costin, a senior associate with a chartered accountancy firm. Costin thinks the process is computer-generated, and the ATO is probably targeting people who have owed money in taxes before; “that’s when the big guns come out. They’re selective.”
Here’s Costin’s advice for what to do. Phone the ATO, explain your circumstances and get a reference number. Ask for time to lodge without penalty. Then send a letter explaining your circumstances and quoting the reference number. The ATO may send you a tax return form, or a form for explaining why you don’t need to do one. The ATO may accept estimates of things like income. If you were overseas, attach passport information.
Some people told Crikey they delivered a “self-assessment” over the phone that they were not required to file a return, and the ATO updated their files.
And remember that the ATO’s Taxpayers’ Charter promises: “we will treat you with courtesy, consideration and respect … we will behave with integrity and honesty … we aim to provide accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.” If you have a complaint, go to the Commonwealth Ombudsman.
The ATO confirmed to Crikey that the letter is genuine, and lawyers were being “focused on”. “Our work is aimed at encouraging good habits with lodgement compliance,” a spokeswoman said. “The ATO routinely writes to taxpayers about tax returns that are overdue or not lodged.”
Crikey put to the ATO that it was targeting some people who were young and earned little or no income in the years in question. The spokeswoman claimed the ATO took into account if the person had reported taxable income the previous year, and if they had had tax withheld (or had received income from a trust) in the year in question. She noted that where a person received the letter but there was no “requirement to lodge,” the person had to give “non-lodgement advice” to the ATO.
She said so far this financial year, the ATO had imposed penalties in more than 30,000 cases of people failing to lodge tax returns.
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