Does lodging late increase the risk of a garnishee?

Why late lodgement matters to the ATO

The ATO decides on firmer action by looking at behaviour, not just the size of the debt. Its published factors include whether you respond to reminders, whether you have defaulted on payment plans before, whether GST, PAYG withholding or super are being left unpaid, and whether your lodgements are current. Late lodgement affects almost all of those:

• It hides the debt. Until a BAS or return is lodged, the ATO does not know how much you owe. It can respond by issuing a default assessment based on its own estimate, which is usually higher than the real figure and is immediately collectable.
• It blocks payment plans. The ATO will rarely agree to a plan while lodgements are outstanding, because it cannot see the whole position. Without a plan, there is nothing holding enforcement back. See plans with unlodged returns.
• It reads as disengagement. A taxpayer who lodges on time and cannot pay looks very different in the ATO's systems from one who has stopped lodging. The first is a payment problem; the second looks like avoidance.
• It adds cost. Failure to lodge penalties accrue per 28 days late, on top of interest at 11.43% a year. The debt grows while the ATO's patience shrinks.

How the escalation usually runs

Garnishees rarely come from nowhere. The usual path is a reminder, then a warning letter about firmer action, then the notice. Late lodgers are more exposed at each step because the reminders may be about lodgement rather than payment, and it is easy to treat those as less urgent. By the time a default assessment has been raised and the demand for payment ignored, the ATO has both a collectable debt and a history of non-response, which is exactly the profile it targets.

For companies the same history feeds the director penalty regime. PAYG withholding, GST and super that are reported more than three months late trigger lockdown penalties that a payment plan cannot remit. Late lodgement is the single behaviour that converts a company debt into a personal one.

Lodging late on purpose because you cannot pay

Some people delay lodging because they know they cannot pay the bill and hope to buy time. It usually does the opposite. Lodging on time and then asking for a payment plan is a normal, well worn path that the ATO deals with every day. Debts up to $200,000 can be put on a plan online without speaking to anyone. Not lodging removes that option and swaps a payment conversation for an enforcement one.

If you are behind on several periods, the practical order is:

1. Lodge everything, oldest first, even if the numbers are estimates you will amend later. Ask an agent about lodgement deferrals only if there is a real reason.
2. Once the balance is visible, set up a plan or call 13 11 42 to negotiate one.
3. Ask for remission of failure to lodge penalties and interest where there is a reasonable explanation. See penalty remission.

Getting current does not guarantee the ATO will never issue a notice, but it changes what the ATO sees when it decides whether to.

What to do next

1. List every overdue return and BAS and lodge them, oldest first, so the ATO can see the real debt.
2. As soon as the balance is visible, set up a payment plan online or call the ATO on 13 11 42.
3. Ask for remission of failure to lodge penalties and interest, with the reason for the delay.

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