The ATO can apply a penalty if you fail to declare income in your tax return that results in a tax shortfall.

Penalties start at 25% of the tax liability owing and then escalate quickly if you were:

  • reckless (50%), or
  • intentionally tried to evade tax (75%).

Then, if they are really unhappy with you, they can increase the penalty base amount by 20%.

There are also penalties that can apply if there is no shortfall but you didn’t take reasonable care, were reckless, or intentionally disregarded your obligations. Penalties of up to 75% of the tax liability can also apply if you don’t lodge your tax return and the ATO takes a position on what they believe you owe – tax is still owing even if you don’t lodge your return.

If you are an Australian resident for tax purposes (and not classified as a temporary resident), you are taxed on your worldwide assessable income, such as:

  • Salary & wages
  • director or consulting fees
  • some allowances, bonuses, commissions, etc
  • Interest
  • Pensions
  • rental and other investment income
  • gifts and other income, if you are a content creator.

For those with income from overseas, if you have paid tax on that income overseas, you will need to declare the income on your tax return, but you might be eligible to reduce your Australian tax bill by the tax you have already paid overseas.

The ATO is upfront about what their tax time targets are so if you ignore the warnings then it’s less likely they will consider any omission an honest mistake. A bit like watching those border control shows when someone claims that they had no idea that seafood is considered a food and should have been declared.