Late filing penalties for GST returns

Sections 139AAA, 142(1) and 142(1B) of the Tax Administration Act 1994

A late filing penalty has been introduced for GST returns that are not filed by the due date.

Background

Previously, when taxpayers failed to file their GST returns, Inland Revenue issued a default assessment. A default assessment is an estimation of tax liability and remains in place until the taxpayer files the return. A default assessment is likely to present a slightly larger debt than a self-assessment as it is intended to encourage taxpayers to file their returns.

The discussion document, Tax penalties, tax agents and disclosures, noted that the default assessment is in many cases an excessive response to non-filing and that imposing a late filing penalty is a more appropriate response, with the default assessment reserved for significant or ongoing non-compliance.

A late filing penalty will be imposed for failing to file a GST return on time. There are two levels of penalty: if the taxpayer accounts for GST on an invoice or hybrid basis the late filing penalty is $250, and for taxpayers who account for GST on a payments basis the penalty is $50.

As is the practice in relation to late filed employer monthly schedules, the first time a GST return is filed late Inland Revenue will advise the taxpayer that the return is late and warn that subsequent breaches will be penalised. A late filing penalty will be payable if any GST returns are filed late in the 12 months following the first breach. If all returns are filed on time for a year, the process will start again - that is, if a subsequent return is late, the taxpayer will be warned.

Application date

The amendment applies to tax positions taken on or after 1 April 2008.