ATO Penalties Are Increasing: What the New Penalty Unit Means for YouATO Penalties Are Increasing: What the New Penalty Unit Means for You
From 1 July 2026, the value of a Commonwealth penalty unit increased from $330 to $364.
It might look like a relatively small change, but penalty units are used to calculate a wide range of ATO penalties. This means late lodgements, incorrect statements and certain SMSF compliance breaches can now come with a higher price tag.
Rather than setting a fixed dollar amount for every offence, Commonwealth legislation often expresses penalties as a number of penalty units. When the value of each unit increases, the dollar value of those penalties increases with it.
The new $364 rate applies to breaches occurring on or after 1 July 2026. Breaches that occurred before this date continue to be assessed using the previous rate.
Where Could the Higher Penalties Apply?
A number of common tax and superannuation compliance penalties are calculated using penalty units. Here are some areas where the increase could make a noticeable difference.
Lodging Tax Returns and Statements Late
Failure to lodge on time is one of the more common situations where a penalty can arise.
For tax returns, activity statements and other documents that aren’t lodged by the due date, the base penalty is generally one penalty unit for each 28-day period or part of a 28-day period that the document remains overdue, up to a maximum of five penalty units.
For a small entity, the maximum base penalty has therefore increased from $1,650 to $1,820.
Medium and large entities can face higher penalties, while significantly larger penalties apply to significant global entities.
Providing False or Misleading Information
Penalties can also apply where incorrect or misleading information is provided to the ATO.
Where the statement doesn’t result in a tax shortfall, base penalties of 20, 40 or 60 penalty units may apply depending on the circumstances and the level of care taken.
At the new $364 penalty unit value, that equates to base penalties of:
- 20 penalty units – $7,280
- 40 penalty units – $14,560
- 60 penalty units – $21,840
These amounts are before any increases or reductions that may apply based on the particular circumstances.
SMSF Trustees Need to Pay Attention
The increase is also relevant for trustees of self managed super funds (SMSFs), as a range of SMSF administrative penalties are calculated using penalty units.
For example, a breach carrying a 60-unit penalty that previously resulted in a $19,800 penalty will now result in a $21,840 penalty.
There is another important consideration for SMSFs with individual trustees. Administrative penalties are generally imposed on each individual trustee, rather than simply being charged once to the fund.
As a result, the total cost of a compliance breach can quickly multiply where an SMSF has several individual trustees. These penalties also generally can’t be paid using the assets of the SMSF.
The higher penalty unit value may also affect other areas, including certain record-keeping obligations, tax invoice requirements and some superannuation guarantee penalties.
Why Staying on Top of Compliance Matters
The good news is that many of these penalties can be avoided.
Late lodgements, incomplete records and incorrect information are common reasons taxpayers run into problems with the ATO. With penalty units now worth more, relatively simple compliance mistakes can become increasingly expensive — particularly where several obligations are overdue or the same issue occurs more than once.
It’s also worth remembering that ATO penalties are generally not tax deductible, so the financial impact isn’t reduced by a corresponding tax deduction.
In some circumstances, the ATO may agree to remit a penalty in part or in full. Factors such as genuine mitigating circumstances, whether reasonable care was taken and whether a voluntary disclosure was made before the ATO identified the issue can all be relevant.
The key is to deal with problems early. Waiting until the ATO starts formal compliance action will often leave you with fewer options.
Simple Steps to Reduce the Risk of Penalties
A few practical habits can make a significant difference:
- Don’t leave lodgements until the last minute. Getting your information to us well before the due date allows enough time to prepare accurate returns and meet the relevant deadlines.
- Keep your records up to date. Good records make it easier to lodge correctly and support your tax position if the ATO asks questions later.
- Check your compliance regularly. Businesses and SMSF trustees can benefit from periodic reviews to identify outstanding obligations or potential issues before they become more serious.
- Ask for help early. If you’ve fallen behind or think an error has been made, speaking with us before the ATO contacts you can provide more options for putting things right.
A Small Increase That Can Add Up Quickly
The increase from $330 to $364 per penalty unit is a useful reminder that the cost of getting tax and superannuation compliance wrong continues to rise.
For most taxpayers, the best protection remains relatively straightforward: lodge on time, maintain good records, check information carefully and address problems as soon as they’re identified.
If you’re concerned about overdue lodgements, record-keeping requirements or another tax compliance issue, please get in touch. Bates Cosgrave can help you work through the problem early and reduce the risk of unnecessary penalties.