ATO issues new guidance on penalties for non-compliance with STP

The draft practice statement sets out a five-step process for ATO staff to follow when raising penalties against an entity for failing to comply with its STP reporting obligations.

The first step explains how ATO staff determine the type of penalty applicable to the entity's circumstances.

PS LA 2026/D2 outlined two types of conduct that can make an entity liable to an administrative penalty. These include failing to lodge STP reporting or lodging STP reporting but failing to do so in the approved form.

An entity is also liable to an administrative penalty if they make a statement in its STP reporting that is false or misleading in a material particular.

The ATO stated that if an entity makes several false or misleading statements in the same document, the entity is liable to a penalty for each statement.

"For example, an entity that makes a false or misleading statement relating to each of their 10 employees has made 10 statements and will be liable to 10 administrative penalties," it said.

For step two, ATO staff are required to consider whether the law protects the entity from penalties given the entity's circumstances.

"An entity will not be liable to a false or misleading statement penalty where they and their agent took reasonable care in connection with making the statement," the practice statement said.

When assessing an entity's behaviour in making a statement, the ATO said staff must consider the actions and behaviours at the time the statement was made. It noted that Miscellaneous Taxation Ruling MT 2008/1 provides guidelines for determining whether an entity took reasonable care.

"The 'reasonable care test' requires an entity to make a reasonable and genuine attempt to comply with obligations imposed under legislative requirements. This means considering actions leading up to the making of the statement," the practice statement said.

"Making a genuine attempt means that the entity was actively engaged with the tax and superannuation systems and actively attempting to comply with their reporting obligations. When considering if a genuine attempt has been made, we compare the entity's attempt with that of other entities in similar circumstances."

The draft practice statement said there were a range of factors that were relevant for assessing reasonable care.

Where there is an inadvertent mistake, the ATO said staff should examine whether reasonable enquiries were made, including whether the entity conducted an enquiry commensurate with the risk of the decision and its resources, or whether the entity simply assumed the statement was correct.

It also said ATO staff should look at:

• Whether the entity was aware, or should have been aware, of the correct treatment of the law or of the facts.
• Whether any factors prevented the entity from seeking advice, understanding the requirements of the tax law or reporting correctly, and
• Whether the entity's level of knowledge, understanding of the tax and superannuation systems or circumstances impacted their compliance.

The practice statement also noted that an entity is not liable for a false or misleading statement penalty if it corrects a false or misleading statement made in the course of its STP reporting within a prescribed period.

PS LA 2026/D2 also sets out how the safe harbour exception applies for entities where an agent has failed to take reasonable care:

"In relation to penalties for failing to lodge in the approved form by the due date, the safe harbour applies where all of the following apply:

• The entity provided all relevant information to the registered agent to enable the document to be lodged on time (noting that the onus is on the entity to prove that they met this requirement).
• The registered agent does not lodge the document on time, and
• The failure to lodge on time was not due to either

• •  Intentional disregard of a taxation law by the registered agent, or
  •  Recklessness by the registered agent as to the operation of a taxation law."

"Entities that engage the services of third-party payroll service providers are not protected from penalties by the safe harbours for the actions of the payroll service provider unless the third-party payroll service provider is also a registered tax or BAS agent," it said.

Steps three and four require ATO staff to determine the extent and amount of the penalty and consider penalty remission. Appendix C sets out a detailed four-step remission process that staff must follow.

Step five outlines what should be included in the written notice of the penalty.

The PS LA 2026/D2 is open for consultation until Friday, 24 April.

In a public statement, the ATO said STP and superannuation member account reporting were critical to the administration of the tax and super systems, and relied on by millions of individuals to manage their tax and super affairs.

"It's essential that this reporting is accurate and lodged on time," it said.

"The draft practice statements will assist ATO staff when applying penalties for STP or superannuation member account reporting that is inaccurate or late."