Quick answer
The ATO's failure to lodge (FTL) penalty builds up by one penalty unit for every four weeks (or part of four weeks) a BAS, tax return or similar document runs late, topping out at five units for a small business. For late lodgements on or after 1 July 2026 a penalty unit is $364, so one document can cost up to $1,820, doubled or quintupled for medium and large withholders. Lodge first, then ask for remission.
Key points
- The penalty unit rose to $364 for infringements on or after 1 July 2026 (it was $330 before that).
- Small businesses face one unit per 28 days late, up to five units, for each overdue document.
- Medium withholders pay double the base and large withholders five times the base.
- The ATO generally warns you first and doesn't usually penalise an isolated late lodgement.
- You must lodge everything outstanding before you can ask for the penalty to be remitted.
The ATO’s failure to lodge penalty is charged per late document: a unit for every four-week stretch it sits overdue, with small businesses capped at five. From 1 July 2026 a penalty unit is $364, so a single overdue BAS or tax return can cost up to $1,820. Three late quarters can mean three penalties. Lodging fast, then asking for remission, is the fix.
The penalty itself is rarely what sinks a business. The bigger cost is what late lodgements do to everything around them, including your ability to borrow. This guide covers both.
How is the failure to lodge penalty calculated?
Your starting point is the date the document was due. Every 28 days that passes from then (and any leftover days) adds one unit to the bill, and the count stops growing once it hits five. The full method is on the ATO’s failure to lodge on time penalty page.
The penalty unit is set by law and indexed. According to the ATO’s penalty units page, it’s $364 for infringements on or after 1 July 2026. Between 7 November 2024 and 30 June 2026 it was $330. Which value applies depends on when the infringement happened.
Then a multiplier applies depending on the size of the entity:
| Who you are | Multiplier | Maximum per document (unit of $364) |
|---|---|---|
| Individual or small withholder | Base | $1,820 |
| Medium withholder | Base x 2 | $3,640 |
| Large withholder | Base x 5 | $9,100 |
Which row applies depends on size. Broadly, a business moves into the middle tier once its yearly PAYG withholding passes $25,000 and its income or GST turnover sits in the $1 million to $20 million band; above $1 million of withholding, or $20 million of turnover, it lands in the top tier.
The penalty applies document by document. The ATO’s list includes activity statements, income tax returns, FBT returns, PAYG withholding annual reports, Single Touch Payroll reports, annual GST returns and taxable payments annual reports, among others.
Will the ATO actually charge it?
Not always straight away. For a one-off late lodgement the usual first step is contact from the ATO asking you to get the document in, and your situation is taken into account. Penalties tend to follow when those requests go unanswered or lateness becomes a pattern.
One exception helps many small businesses: if the late BAS or return turns out to show a refund or nothing payable, you generally won’t be penalised. That relief doesn’t extend to the biggest withholders, to third-party reporting obligations, or to a penalty that was already issued before the document arrived.
So the businesses that feel this penalty most are the ones several quarters behind, with amounts owing on each, who haven’t answered the ATO’s letters. That’s also the profile lenders worry about most.
How do you get a failure to lodge penalty remitted?
The ATO can cancel all or part of a penalty, and it judges each request individually. Here’s the order to work in:
- Lodge everything that’s outstanding. The ATO won’t consider remission until you have.
- Explain what happened. Describe the event, how it caused the delay, whether it was beyond your control and why you, or your tax professional, couldn’t ask for more time.
- Send it the right way. Use secure mail in Online services for business, have your agent use practice mail, or call for amounts under $10,000. Amounts of $10,000 or more need a letter.
Reasons that tend to succeed are serious: a major illness affecting your agent or a person you care for, a natural disaster, third parties failing to send you information you needed, or financial abuse, coercive control or family violence. Being on leave, being busy, a minor bout of illness or missing a reminder rarely gets anywhere.
On its remission of penalties page, the ATO adds that it looks at your overall compliance history, any outstanding lodgements, any tax debts and your personal circumstances.
If your registered tax or BAS agent handled lodgement and you’d supplied them with all the information on time, a safe harbour may protect you, provided the agent’s lateness wasn’t reckless or a deliberate disregard of the law.
Why do late lodgements matter to a lender?
A lender doesn’t much care about a $364 penalty. They care about what late lodgements say, and what they hide.
- They hide the real ATO balance. Until a BAS is lodged, the GST and PAYG on it aren’t on your ATO account. A lender can’t tell whether you owe a little or a lot.
- They suggest the books are behind. If BAS isn’t lodged, profit and loss reports are usually stale too.
- They limit the evidence you can offer. Lodged BAS is the most common substitute for tax returns in low doc lending. Without it, you’re relying on bank statements alone.
That doesn’t mean the door is shut. Our page on low doc business loans explains how lenders work with lighter paperwork, and property-secured lenders focus more heavily on the security than on lodgement history. But your options widen noticeably once you’re current.
If you’re behind and also need funding soon, start a quick enquiry and tell us where your lodgements are up to. Honesty here saves everyone time.
What’s the smartest order to catch up in?
Every business is different, and your BAS agent or accountant should set the plan. Here’s the logic most follow:
- Answer any ATO request to lodge. That’s the document where a penalty is most likely.
- Lodge the oldest BAS first, so the ATO account starts reflecting reality.
- Lodge even if you can’t pay. Late payment and late lodgement are separate problems. Lodging stops the FTL clock; the debt can be dealt with through a payment plan or an ATO tax debt loan.
- Then the tax returns, which lenders will eventually want for larger or longer-term borrowing.
- Then ask for remission, once everything is in.
Keep an eye on the BAS due dates while you catch up. Quarterly BAS is due 28 October, 28 February, 28 April and 28 July, with extra time often available through online or agent lodgement. Falling behind on the current quarter while fixing old ones just restarts the problem.
What does this look like in practice?
Illustrative example only. A sole-trader electrician had a difficult year with a family illness and fell four quarters behind on BAS. The ATO sent a request to lodge, which sat unopened on the bench. Two penalty notices followed.
Once things settled, a new BAS agent lodged all four quarters within a fortnight. That revealed a GST and PAYG instalment balance of around $38k. The agent then lodged a remission request for the penalties, explaining the illness with supporting detail, and the ATO remitted most of them.
The bigger issue was the $38k balance. With BAS now lodged and bank statements showing steady work, the electrician was able to look at an unsecured option to clear it in one go rather than juggling a payment plan alongside a full order book. The electrician business loan page covers how lenders read sparkies’ income.
Caught up, or nearly there? Let’s look at what’s possible
Getting lodgements back on track is the hard, unglamorous bit, and you’ve done it or you’re close. What’s left is usually a tax balance or a cash gap, and that’s something we look at every day.
The enquiry takes around a minute, and there’s no credit check when you first enquire. Your details aren’t sent to a pile of lenders, so there’s no flood of calls. A real person reads it, including where your BAS and returns are up to, and phones you to talk it through. Please fill the form in accurately, especially what’s lodged and what’s owed, so we can match you with the right option first time.
Frequently asked questions
How much is the ATO failure to lodge penalty?
Count the 28-day blocks the document is overdue, rounding any part block up, and that's how many penalty units a small withholder or individual is charged, with five as the ceiling. A penalty unit is $364 for infringements on or after 1 July 2026, so the maximum per document is $1,820.
Is the penalty per BAS or per year?
Per document. Each overdue activity statement, tax return or report can attract its own penalty, which is why a business several quarters behind can face several penalties at once.
Will the ATO definitely charge it?
Not always. A one-off slip usually gets a warning and a request to lodge rather than a bill. Penalties become likely when the ATO has already chased you and the documents still don't arrive.
Do I get a penalty if my late return is a refund?
Usually not. If the late document ends up showing a refund or nothing owing, a penalty notice is unlikely. The exceptions: the penalty was already raised before you lodged, the document is a third-party data report, or your business is a large withholder.
How do I get the penalty removed?
Lodge all outstanding documents, then request remission through Online services for business, your agent or by phone or letter depending on the amount. Explain what happened, how it caused the delay, whether it was outside your control and why you couldn't ask for more time.
Can I get a business loan if my lodgements are behind?
Sometimes, but it narrows your options. Low doc lenders may accept bank statements and an accountant's letter, and property-secured lenders focus more on the security. Getting lodgements current first usually opens more doors.