Ways To Avoid Company Tax Return Penalties To Get A Better Tax Refund

Company Tax Return

Taxation rules in Australia are very stringent, and not following them can attract penalties from the Australian Taxation Office (ATO). It becomes all the more difficult for companies whose income and expenses vary on a monthly or yearly basis as they find it hard to keep track of the amount to be paid taxes.

If you run a company in Perth, it is better to hire a tax agent Perth to help with your tax return so that you don’t end up overpaying so much that you can’t fulfil other expenses. You also do not want to receive a penalty for underpaying your tax. So, let’s see what ways you can adopt to avoid tax return penalties and get a better tax refund.

ATO Guidelines On Tax Penalty

There may be several reasons for charging companies with tax penalties by the ATO. Failing to meet tax obligations generally results in penalties being applied. Here are some scenarios when the ATO imposes administrative penalties on companies:

  • When a company makes a false or misleading statement or takes a position that is not reasonably arguable.
  • If a company fails to lodge a statement or tax return on time.
  • When a business fails in withholding amounts as required under the PAYG withholding system.
  • If a business fails to meet any other tax obligations.

The ATO has kept the penalty provisions so that all taxpayers take reasonable care to comply with their tax obligations. It also considers the circumstances of an individual or business while deciding on the necessary actions.

If a company is liable for a penalty, the ATO notifies it in writing, which includes:

  • reasons for the penalty
  • the penalty amount
  • the due date for payment which is at least 14 days after it gives the notice

A company cannot claim any deduction for the penalties imposed by the ATO.

The penalty amount is calculated using either:

  • a statutory formula based on the company’s behaviour and the tax amount avoided
  • multiples of a penalty unit

How To Avoid Company Tax Return Penalties Imposed By the ATO?

Make Separate Bank Account For Your Business

Maintaining your personal and business finances in a single bank account is not at all advisable. Always prioritise keeping a separate bank account and credit card for all your business-related expenses. During the tax season, it will be a lot easier for you to provide accurate records of your bank statements in your tax return.

Your accountant would also not go through a hard time identifying between your personal and company records.

Base Your Tax Payments On Earnings Of Last Year

If you at least pay the same amount of tax that you paid last year, you can avoid a penalty. You can easily check the total tax you paid on your previous year’s tax return. If your taxes for this year turn out to be more than the previous year, you would at least avoid getting a penalty for underpayment. Also, note that if you did not come under the tax liability last year, you wouldn’t attract a penalty for not paying the current year’s tax before the tax return time.

Keep Track Of Your Tax All Year Round

So that you do not get a shock at the year-end, maintain your books properly and keep track of your tax round the year. Calculate your income quarterly and, based on that, decide whether you should increase or decrease the quarterly payments.

If you maintain a dedicated checking account for your company’s income deposits, a continuous assessment will only take a few minutes to check in on your online bank records. That way, when you file company tax return, you would not have to face any issues.

It Is Better If You Overestimate

Depending on how much underestimation you did on your taxes, tax penalties can get costly. You will be fined for falling short, and also, interest is charged on the amount you underpay from the date your payment is due until the date it is finally paid. So, it is always better if you overestimate your taxes a little. That way, you will avoid losing any money in the long haul, as you will eventually get it back as a tax refund.

Always Stay Up To Date

Staying up-to-date with the changing rules in the tax laws would help you avoid a penalty. The tax laws keep on changing and updating over the years, so it is better you hire a professional accountant who is well-versed with the current tax laws. That way, you would not have to bear the burden of keeping up with the ever-changing laws of taxation.

Use Modern Software And Applications

You can easily simplify your business by using different applications to maintain your books properly. That way, during the tax season, you will not have to worry about any disorganized data. You can also subscribe to various sites that provide valuable insights to keep you updated on the important dates and latest reforms on the tax laws.Also, note that if you did not come under the tax liability last year, you wouldn’t attract a penalty for not paying the current year’s tax before the tax return time.

Always Hire An Accountant

Taxation laws are quite extensive and complex to demystify. So, if you do not have proper knowledge about the regulations, chances are you would attract a penalty from the ATO. To avoid that, you can easily hire an expert tax accountant to file your company tax return. The accountants are well-versed with the ins and outs of the tax genre and will help you avoid a penalty.

Apart from that, they can also provide valuable insight into your company and help it grow in the long run.

Final Words

You need to be very cautious in calculating your company’s taxes and paying them on time to avoid any penalty from the tax authorities. If you are in search of a top tax consultant Perth, get in touch with the leading tax firms in the town who are skilled to the brim and will handle your company’s accounting and tax matters efficiently.


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