Penalty tax and interest apply if you fail to meet your tax obligations.
Tax defaults
A tax default happens when you don’t pay your tax liability on time. There are 2 types of tax defaults:
- Late payment tax default: Paying the correct amount after the due date.
- Tax shortfall tax default: Paying no tax or less than the full amount.
Notification defaults
A notification default happens when you don’t notify the Commissioner of State Revenue about certain tax-related events. This applies to land tax, vacant residential land tax and windfall gains tax. Penalty tax is imposed if a notification default results in additional liability. Interest does not apply to notification defaults.
Penalty tax
Penalty tax may apply if a tax default or notification default occurs. If the penalty tax is less than $20, you won’t have to pay it.
Penalty tax rates
The penalty tax rate depends on whether the Commissioner believes you failed to take reasonable care or ignored the law.
Failure to take reasonable care but no intentional disregard of the law
Reasonable care means trying your best to follow tax laws. This means keeping good records, understanding the laws, asking for help if needed, and being honest with us.
The basic penalty tax rate is 25% of the unpaid tax. This rate can change based on your situation:
- If you took reasonable care but still made a mistake or if the default happened due to circumstances beyond your control, no penalty tax will be charged.
- If you tell us about a tax mistake before we start an investigation, your penalty tax can be reduced to 5%.
- If you tell us about a tax mistake during an investigation, it can be reduced to 20%.
- If you hide information or obstruct an investigation, the penalty rate can increase to 30%.
Intentional disregard of the law
Deliberate actions that cause a tax default, like tax evasion or making false statements, are considered intentional disregard of tax laws. The penalty tax rate goes up to 75% if you intentionally disregard the law.
- If you tell us about a tax mistake before we start an investigation, your penalty tax can be reduced to 15%.
- If you tell us about a tax mistake during an investigation, it can be reduced to 60%.
- If you hide information or obstruct an investigation, the penalty rate can increase to 90%.
Interest
If a tax default occurs, interest is charged on unpaid tax and unpaid penalty tax. The Commissioner has the power to partly or fully remit interest. Interest does not apply to notification defaults.
From 1 July 2024 to 30 June 2025, the rate of interest is 12.36%. There are 2 parts to the interest:
- The market rate: 4.36% per year (adjusted annually on 1 July).
- The premium rate: an extra 8% per year.
Circumstances beyond the customer’s control
Sometimes, events beyond your control – like natural disasters or sudden illness – can affect your ability to meet tax obligations. The Commissioner considers these circumstances when deciding on penalty tax.
Failures by representatives or third parties
If your representative causes a tax default, you are still responsible. The Commissioner will consider whether you took reasonable care in choosing and supervising your representative.
If a third party, other than your representative, fails to provide necessary information, your responsibility is evaluated based on your efforts to ensure accuracy and assist the third party.
Related revenue rulings
We have detailed information on how penalty tax and interest rates apply in our revenue rulings. The rulings explain how the Commissioner uses discretion after considering all relevant circumstances.
