I haven't lodged a tax return in years. What happens now?
Short answer
You lodge them, all of them, and it is much less painful than most people expect. Prior year returns can be lodged for any year. Late penalties are capped at $1,820 per return for individuals and are generally not applied where the return produces a refund or nil result. The real risks come from not lodging: a default assessment with a 75% penalty, retained refunds, and in rare cases prosecution.
What the ATO does if you stay silent
The ATO already holds most of your income data: wages through Single Touch Payroll, bank interest, dividends, share and property sales, and government payments. So years of not lodging does not mean the ATO does not know. It means the ATO has been waiting.
Its stated approach is to contact you by SMS, myGov, letter and phone, warn you before applying a failure to lodge penalty, and then, if you still do not lodge, escalate:
- Final notice to lodge. A legal document requiring lodgement by a stated date.
- Default assessment. The ATO estimates your income and issues an assessment for the tax, plus a 75% administrative penalty. Estimates are rarely generous, and you have to lodge a real return to displace them.
- Retained refunds. The ATO can hold any refund until outstanding returns are in.
- Prosecution. Failing to lodge is an offence. A court can impose fines and up to 12 months imprisonment. The ATO says it will notify you first, and in practice this is used against people who ignore formal notices, not people who come forward.
The penalties in real numbers
The failure to lodge penalty for an individual or small entity is one penalty unit for each 28 days or part of 28 days the return is late, capped at 5 units. At the current $364 unit that is a maximum of $1,820 per return, no matter how many years late it is. Medium entities pay double and large entities five times that.
Two things soften it further. The ATO generally does not issue a failure to lodge penalty where the late return results in a refund or a nil result, and it can remit the penalty where there were circumstances such as illness or family crisis. See penalty remission.
Interest is the larger cost. If a year produces a bill, general interest charge runs from that year's original due date at the rate in force at the time, currently 11.43% per year compounding daily. Refunds from other years are offset against those bills before anything is paid out to you.
Years of returns to catch up on?
No judgement. Get matched with someone who does this every week.
How to catch up
- Find out which years are outstanding. myGov lists them under lodgements. A registered tax agent can see the same list and the pre-filled income data for most years, which is often enough to complete a simple return without old paperwork.
- Lodge oldest first, before the ATO assesses for you. Lodging first avoids the 75% default assessment penalty entirely.
- Deal with the bill once the true figure is known. A payment plan becomes available only once lodgements are up to date. Interest remission and, for individuals, hardship release can also be requested at that point.
If you are a sole trader with unlodged BAS as well, lodge those too. Our ignoring ATO debt page explains why the ATO treats an engaged taxpayer with a large debt far better than a silent one with a small one, and can't pay a tax bill covers what to do if the total is beyond you.
What to do next
- Log in to myGov and list every year showing as not lodged, or ask a tax agent to pull the list.
- Lodge the outstanding returns, oldest first, using pre-filled data where it exists.
- Once the total is known, set up a payment plan or get advice on remission and hardship options.
Related questions
Will I get a refund for old years if I lodge late?
Often, yes. There is no time limit on lodging a return, and if it results in a refund the ATO generally does not apply a late penalty. But any refund is first offset against tax debts from other years, so the cash you receive may be less than the sum of the refunds.
Can I get a payment plan before I lodge the outstanding returns?
Generally no. The ATO expects lodgements to be up to date before it agrees to a payment plan, because until then it does not know the true debt. Lodging is the step that unlocks a plan, interest remission requests and hardship applications.
Years of returns to catch up on?
No judgement. Get matched with someone who does this every week.
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