What happens if you haven't paid tax for years?

Two different situations

You lodged but never paid. The ATO knows the exact amount. It has been adding general interest charge (currently 11.43% per year, compounding daily) since each due date. A $30,000 debt left alone for five years is well over $50,000 at today's rate. Every refund you were entitled to in those years was offset against it. If the ATO decided the debt was uneconomical to pursue, it may have been placed on hold, but on-hold debts are being re-raised and can be offset without notice. See old ATO debt reappeared.

You never lodged. The ATO may not know the exact figure, but it knows you exist. Employers, banks, share registries and other agencies report to it. It can estimate your income and issue a default assessment, which comes with a 75% administrative penalty on top of the tax. Failing to lodge is also an offence the ATO can prosecute, and a court can impose fines and up to 12 months imprisonment. In practice, prosecution is reserved for people who ignore formal notices to lodge.

What the ATO does after years of silence

A long silence does not put you at the bottom of the queue. The ATO's firmer action page lists refusing to engage and ignoring reminders as the behaviours most likely to bring on garnishees, credit reporting and director penalty notices. A debt that has aged for years usually sits inside exactly that profile.

• Individuals: garnishee of wages or bank accounts, then a bankruptcy notice if the debt is large enough to justify court.
• Company directors: a director penalty notice for unpaid PAYG withholding, GST and super. If the BAS were lodged more than three months late, or never, the penalty is locked down and only payment removes it.
• Anyone: refunds and government credits offset, collection agencies, and in extreme cases a departure prohibition order stopping you leaving Australia.

The full escalation path is set out on our ignoring ATO debt page.

Catching up is normal, and it is easier than you think

Outstanding returns can be lodged for any prior year. A tax agent can see your pre-filled income data for most years, which makes reconstruction far quicker than starting from shoeboxes. Late lodgement penalties are capped at 5 penalty units per return for individuals and small entities ($1,820 at the current $364 unit), and the ATO generally does not apply them where the return results in a refund or nil.

Once the returns are in and the true figure is known, the options open up: a payment plan, a request to remit some of the interest, or for individuals in genuine hardship, release. The ATO also cannot give you a payment plan while returns are outstanding, so lodging is the key that unlocks everything else. If the total is beyond reach, see what to do when you can't pay a tax bill.

What to do next

1. Find out where you stand: log in to myGov and check for outstanding lodgements and the balance owing, or ask a tax agent to pull your account.
2. Lodge every outstanding return or BAS before doing anything else, oldest first.
3. With the true total known, decide between a payment plan, a remission request, hardship release or a structured option, ideally with someone who negotiates with the ATO regularly.

More questions: 11 What happens if you don't pay questions answered · Full guide: Ignoring ATO debt