Tax lodgement at the right time is essential. It’s not only about filing your tax early but about filing the returns at the perfect time. In addition, you may read up on news and articles or even suggestions from your friends working as accounting consultants. They all encourage you to lodge tax on time and avoid all possible chances of overdue taxes. But is that crucial? Do you receive any benefits of lodging tax on time?
5 Benefits Of Timely Tax Lodgement
Here are the five compelling reasons why tax lodgement on time can work wonders for you.
1. Avoid Late Lodgement Fines
Lodging your tax after its due date can mean paying additional amounts. Why would anyone want to spend more, considering inflation continues to rise anyway? But that’s the drawback you face when you fail to lodge tax on time.
The Australian Tax Organization fines one penalty unit every 28 days after the due date. The fine can go for up to five penalty units. And at present, one penalty unit costs around $222.
Imagine delaying your tax lodgement for around two months- that’s $444 more money to pay later! Though, if you lodge tax on time, you can save $400 and keep within your yearly budget!
2. Avoid Bigger Penalties
Another reason to lodge your taxes is to avoid the bigger penalties. Fines are the initial stages. If you still don’t file your tax four months after the due date, ATO can even issue default assessments under your name. The addition of default assessment under your profile can be due to late tax lodgement or if you have numerous years outstanding.
The default assessments are calculated using estimates. Because they consider your total owing and no deductions, the estimated amount can be relatively higher than your current year’s tax liability. You can’t argue about it because you could have avoided this by lodging tax on time. As a result, you must pay whatever the amount forecasted in the assessment.
If you lodge your income tax on time, you avoid these significantly higher amounts. Isn’t it better to pay your actual taxes on time instead of being forced to pay an amount that may not be correct?
3. Avoid Potential Lawsuits By The Government
While it is not a common practice, ATO can prosecute you if you delay your tax lodgement. If ATO sues you, the penalty for the lawsuit is quite extensive. Monetary penalties can cost you around $9000! And scarier than this, you may save yourself from this financial loss but end up in a deeper grave. You may face imprisonment for a maximum of 12 months!
However, a timely tax lodgement reduces your anxiety because you can avoid fretting over excessive fines or imprisonment. You’re a responsible Australian who values efficient tax lodgement, after all.
4. Save Your Credit Scores
Fines and penalties because of late tax lodgement can harm your credit scores. Reputed banks always request your income tax returns while determining if they’ll offer you loans or not. So, if you plan to get a house mortgage or vehicle loan, you must always keep your credit scores optimal. One way to ensure this is when you lodge tax on time.
Maintaining your tax schedule can be challenging if you manage your business or job side by side. But you can always get help with lodging your tax return on time. That can assist you in keeping your tax lodgement smooth and protect your credit scores for upcoming loans.
5. Avail Tax Refunds
If you lodge tax on time, you can claim tax refunds. So, if your total taxes- including the direct and indirect ones- are more than the amount you need to pay, you can apply for tax returns. The ATO can either refund you the excess or usually adjust the additional amount in the following year’s tax liability.
Though, you can enjoy this perk only if you lodge your income tax on time. If you delay the procedure and end up penalized, you can’t apply for the tax return anymore.
Tax lodging can be tricky. But a timely lodgement can save you from fines, penalties and offer several other benefits. We hope that the five benefits and reasons for timely tax lodgement helped persuade you to avoid tax lodgement delays. Delaying your tax filing can create massive hassles for you. So, as a responsible citizen of Australia, it’s better to play it safe and keep your income tax returns up-to-date.
Happy tax lodging!