Penalties, Interest, and Voluntary Disclosure
Division 284 penalty rates, GIC and SIC calculations, the value of voluntary disclosure, and how to request remission when things go wrong.
Administrative penalties under Division 284 of the Tax Administration Act 1953 range from 25% of the tax shortfall for failure to take reasonable care, through 50% for recklessness, to 75% for intentional disregard, with a further 20% uplift for prior relevant penalty history. Voluntary disclosure before the ATO contacts you typically earns an 80% reduction in the base penalty. From 1 July 2025, General Interest Charge on unpaid tax is no longer deductible, making timely payment or early engagement with the ATO materially more important.
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Division 284 administrative penalties
The Tax Administration Act 1953 applies base penalty amounts to the tax shortfall (the difference between your correct tax liability and what you reported). Three tiers of culpability drive the base rate: 25% for failure to take reasonable care, 50% for recklessness, and 75% for intentional disregard. A 20% uplift applies where you have prior relevant penalty history, bringing the theoretical maximum to 90% of the shortfall. The uplift is a statutory increase, not a reduction for good behaviour. Good compliance history operates as a discretionary remission factor rather than a Division 284 entitlement.
Safe harbour and reasonably arguable position
A penalty may not arise, or may be reduced, where you held a reasonably arguable position or relied appropriately on competent professional advice. This matters most where the law is contestable and your position is objectively defensible. It is not a universal shield for every error. To rely on professional advice, you must have given the adviser complete and accurate information and the advice must have been specific to your circumstances.
Voluntary disclosure reductions
Disclosing errors voluntarily is the single most effective penalty-reduction mechanism. Pre-contact disclosure, made before the ATO tells you it will conduct an examination, usually earns an 80% reduction in the base penalty. For shortfalls under $1,000 disclosed before examination where no public disclosure program applies, the penalty drops to nil. Post-contact disclosure, made after ATO contact but before the audit concludes, earns around 20% reduction if it significantly saves ATO time and resources. In practice, layered reductions and remission can sometimes reduce even a 75% base penalty to nil, but this is not an automatic mathematical entitlement.
General Interest Charge and Shortfall Interest Charge
GIC applies from the day after the original due date on any unpaid tax, calculated daily on a compounding basis. The formula is the 90-day bank bill rate plus a 7% uplift, set quarterly. For 2025-26, published annual GIC rates ranged from 10.61% to 10.96% across the four quarters. SIC applies specifically to income tax shortfalls identified through amended assessments, at the 90-day bank bill rate plus 3% (6.61% to 6.96% for 2025-26). Both charges are set quarterly by legislative instrument.
Failure to Lodge on time penalty
The Failure to Lodge (FTL) penalty accrues at one penalty unit for each 28-day period or part thereof that a required document is overdue, capped at five penalty units. For infringements from 7 November 2024, one penalty unit is $330, giving a standard maximum FTL penalty of $1,650 for an individual or small entity. The penalty unit is indexed on 1 July annually. The ATO may remit FTL penalties administratively; first-time or low-risk cases can receive relief. Separate from the FTL penalty, late lodgement can also trigger lockdown Director Penalty Notices for company directors, making lodgement discipline critical even when cash is tight.
Requesting remission
Remission is available for administrative penalties, GIC, SIC, and FTL on application. The ATO considers whether remission is fair and reasonable in the circumstances. For GIC remission, cite exceptional circumstances such as serious illness, natural disaster, or factors genuinely outside your control. From 22 January 2026, the ATO requires the relevant application form for remission requests. Remission of penalties can be requested alongside voluntary disclosure. The ATO's published guidance confirms that remission and voluntary disclosure reductions are separate mechanisms that can stack, though each is assessed on its own merits.
When civil penalties become criminal
Serious conduct can move beyond administrative penalties into criminal prosecution. The primary triggers are tax evasion, fraud, and deliberate destruction or concealment of records. Criminal penalties carry imprisonment terms and fines calculated in penalty units under the Crimes Act 1914. Director Penalty Notices are a separate civil regime dealing with company directors' personal exposure for PAYG withholding and superannuation guarantee debts. The threshold between administrative penalty and criminal prosecution is intent: the ATO must establish deliberate dishonesty, not merely carelessness or recklessness, to pursue criminal charges.
Statute references
- Tax Administration Act 1953, Division 284 (administrative penalties)
- Tax Administration Act 1953, Division 298 (General Interest Charge)
- Crimes Act 1914, s 4AA (penalty units)
- Treasury Laws Amendment (Tax Accountability and Fairness) Act 2025 (GIC non-deductibility)
Frequently asked questions
How much can voluntary disclosure reduce my penalty?+
What is the difference between GIC and SIC?+
Can the ATO remit penalties and interest charges?+
What happens if my tax agent lodged late through no fault of mine?+
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