Penalty Units
Increase from 1 July 2026
From 1 July 2026, the value of a Commonwealth penalty unit increased from $330 to $364. Many ATO penalties are calculated by reference to penalty units, so the increase directly affects the cost of a range of compliance failures.
A penalty unit is simply a standard measure used under Commonwealth law to calculate fines and administrative penalties. Where legislation refers to a number of penalty units, the dollar amount increases when the value of a penalty unit increases.
The new value applies from 1 July 2026. Earlier breaches are subject to the penalty unit value applying at the relevant time.
Failure to lodge on time
One of the more common ATO penalties applies where tax returns, activity statements or other required documents are lodged late.
The base penalty is generally one penalty unit for every 28 days, or part of 28 days, that a document remains outstanding, up to a maximum of five penalty units.
For a small entity, the maximum base penalty has increased from: $1,650 to $1,820. Higher penalties can apply to larger entities.
Keeping tax affairs current and providing information well before due dates can help reduce the risk of late lodgement penalties.
False or misleading statements
Providing false or misleading information to the ATO can also result in penalties.
Where there is no tax shortfall, base penalties of 20, 40 or 60 penalty units can apply depending on the circumstances and level of culpability.
From 1 July 2026, these amounts are:
20 penalty units — $7,280
40 penalty units — $14,560
60 penalty units — $21,840
These are base amounts and may be increased, reduced or remitted depending on the circumstances.
An error does not automatically result in a penalty. The circumstances and level of care taken are relevant.
Self-managed super funds
SMSF trustees should also be aware of the higher penalty amounts.
A range of SMSF administrative penalties are calculated using penalty units. For example, a breach attracting 60 penalty units has increased from $19,800 to $21,840.
For funds with individual trustees, penalties can generally be imposed on each individual trustee. Where there is a corporate trustee, the directors can be jointly and severally liable.
These administrative penalties cannot be paid or reimbursed from SMSF assets.
Why this matters
Late lodgements, poor record keeping and incorrect information are common reasons taxpayers incur penalties.
The increase in penalty units may appear modest, but the cost can add up quickly where there are multiple outstanding obligations or repeated compliance issues.
ATO penalties are also generally not tax deductible. For businesses, maintaining reliable accounting and tax compliance systems can help reduce the risk of penalties.
Penalty remission
The ATO has discretion in appropriate circumstances to remit all or part of certain penalties.
There is no automatic entitlement to remission. The ATO will consider the relevant facts and circumstances, including the reasons for the non-compliance and how the issue came to light.
If a penalty has been imposed, it may be appropriate to obtain tax advice before accepting the amount as final.
Practical steps
- Lodge on time. Provide information early enough for returns and statements to be prepared accurately.
- Keep good records. Accurate records make it easier to prepare returns correctly and support your tax positions.
- Review your compliance. Businesses and SMSF trustees should regularly review outstanding obligations.
- Seek advice early. If you believe an error has been made or you have fallen behind, addressing the issue early will generally provide more options.
A timely reminder
The increase in penalty units is a reminder that the cost of tax non-compliance continues to rise. Good record keeping, timely lodgement and early action remain the best ways to minimise unnecessary penalties.
If you have concerns about outstanding lodgements, record-keeping obligations or another tax compliance matter, contact PRATT Partners.
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