“Are there any overdue lodgements or compliance issues we should clean up before the penalties get worse?”

Tax penalties are one of those expenses nobody plans for, and from 1 July 2026, they became a little more expensive.

The value of a Commonwealth penalty unit increased from $330 to $364, and because many ATO penalties are calculated using penalty units, that increase flows directly through to the amount taxpayers can be charged. 

What is a penalty unit?

Rather than writing a fixed dollar amount into every piece of legislation, Commonwealth law often sets fines as a certain number of penalty units. When the value of one unit increases, the fine increases too.

The new $364 amount applies to breaches that occur on or after 1 July 2026. Earlier breaches continue to use the previous rate. 

Late lodgments now cost more

One of the most common examples is a failure-to-lodge penalty.

The base penalty is generally one penalty unit for each 28-day period, or part of one, that a document remains overdue, up to a maximum of five units.

For a small entity, that means the maximum base penalty has increased from $1,650 to $1,820, and larger businesses can face much higher amounts.

Incorrect information can become expensive quickly

False or misleading statements can attract larger penalties. Where there is no 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 rate, that translates to:

• $7,280 
• $14,560 
• or $21,840 

before any reductions or increases are considered.

SMSF trustees should take particular care

SMSF administrative penalties are also linked to penalty units. Some breaches that previously carried a penalty of $19,800 can now result in a penalty of $21,840.

The bigger concern is that these penalties can be imposed on each individual trustee, rather than simply on the fund itself. They also generally cannot be paid using the SMSF’s assets.  A fund with several individual trustees could therefore face a high combined cost.

Most penalties are avoidable

The good news is that these are usually not surprise taxes. They tend to arise from things like:

• late lodgements 
• poor records 
• incorrect information 
• or unresolved compliance issues. 

Getting information to your accountant early, keeping accurate records, and reviewing obligations regularly can dramatically reduce the risk, and if something has already gone wrong, early action matters.

The ATO can consider remitting penalties where there are genuine mitigating circumstances, reasonable care has been taken, or a voluntary disclosure is made before the ATO identifies the issue. 

Final thought

The increase in penalty units is not dramatic on its own, but repeated or multiple compliance problems can add up quickly.

If you know something is overdue or may have been reported incorrectly, talking to your Aspen advisor early is almost always better than waiting for the ATO to make the first move.