Objecting to penalty tax on payroll tax assessments

PTX-02-20

Frequently asked questions

Payroll tax is a self-assessing tax and you are therefore responsible for registering with us, lodging monthly returns, paying tax and completing your annual reconciliation on time.

If you do not meet your payroll tax obligations, we may issue you with an assessment to cover your payroll tax shortfall, as well as penalty tax and/or interest.

Why is penalty tax applied?

Penalty tax is issued when there is a failure to meet a tax obligation on time. Interest charges are imposed on outstanding amounts, such as shortfall amounts, late payments and unpaid tax debts. Penalty tax and interest are imposed to encourage compliance with the taxation law.

What is the standard rate of penalty tax?

The standard rate of penalty tax is 25% of the payroll tax which was not paid on time. In some situations, the rate of penalty tax may be increased or reduced from the standard rate.

When does a higher rate of penalty tax apply?

A penalty tax rate of up to 90% may apply in situations where you have intentionally disregarded your payroll tax obligations and/or have concealed information during an investigation by the State Revenue Office.

When does a lower rate of penalty tax apply?

The penalty tax rate may be reduced to:

5% if you voluntarily disclose information which enables us to assess your payroll tax liability before we start investigating you, or
20% if you disclose information which enables us to assess your payroll tax liability after we start investigating you.

Penalty tax will not be applied if we believe that you have taken reasonable care to comply with your payroll tax obligations, or if circumstances beyond your control have led to the failure to meet your tax obligations. However, interest may still be charged in these situations.

For further information on how the Commissioner applies penalty tax, please refer to the following 2 Revenue Rulings:

Can I object to my penalty tax and interest?

If you believe you should not have been charged penalty tax and interest, or should have been charged less, you have the right to lodge an objection.

You must lodge an objection within 60 days after receiving your assessment or reassessment, stating the circumstances and reasons that have prevented you from lodging your objection within the 60-day time period. You should also provide relevant supporting documents.

If you lodge your objection after the 60-day timeframe, you must provide reasons for the delay. If no reasons are provided to explain the delay, your objection will be invalid.

If your situation falls into one of the categories below, it is unlikely your objection will be successful unless you can provide additional reasons and documentation to justify a further reduction:

If you engaged someone to deal with your tax affairs and should not be penalised for the tax default that arises from their action (or inaction). This is because you are generally responsible for the actions of the representative you have authorised to act on your behalf.
If you did not know you had a payroll tax liability, or you were not told by your accountant or adviser about payroll tax. This does not ordinarily justify a reduction of penalty tax or interest.
If your payroll tax shortfall was due to an oversight rather than a deliberate attempt to avoid land tax. This is because an unintentional tax default does not absolve you of your payroll tax obligations.
If you made a voluntary disclosure before or during an investigation and the penalty tax rate has already been reduced to reflect this. This is because your cooperation has already been taken into consideration with a reduced penalty rate rather than the standard 25%.
Interest imposed at market rates represents compensation to the State Government to cover the costs of your payroll tax shortfall. It does not constitute a penalty. We therefore do not ordinarily reduce interest, even if you have taken reasonable care to comply with your obligations, or circumstances beyond your control have caused your failure to comply.
If you are experiencing financial difficulties or are unable to pay. This does not ordinarily justify a reduction of penalty tax or interest.

Even if you have lodged an objection, you must still pay your assessment in full by the due date or you may be charged late payment interest. If your objection is successful, we will refund any amount overpaid with interest.

What if I can’t pay the full amount by the due date?

If you were unable to pay the full amount by its due date, you can apply for a payment plan. This can only be done once the due date for the assessment has passed. Interest may be charged on payment plans.