NSW Office of State Revenue – Money Grab
A few months ago one of our clients had the misfortune of incurring a 25% penalty on their monthly Payroll Tax obligation.
In line with our client’s excellent lodgement history (as we lodge the returns online), the return was lodged well before the due date. Unfortunately due to some unforseen illness within the clients business, the payment only reached the OSR a mere two days late…
On the same date as the payment was received, an Assessment Notice was sent out stating that as the lodgement was late, a 25% penalty had been imposed. On receipt of the notification our client called the responsible individual at the OSR to explain the situation. The explanation was met with little sympathy, and the cliché ‘the payment coming in and Assessment Notice going out were like ships in the night’, and the individual merely stated that the client could object and sent the relevant details.
An Objection was duly lodged explaining the circumstances and pointing out the excellent lodgement history. Unfortunately the Objection was not allowed and the penalty stood. We asked the client if we could call on their behalf, the client obliged.
Our call was directed to the individual that ruled on the Objection (a different individual to the one who sent out the original Assessment Notice, a segregation of duties if you like), again our discussion with the individual was met with little sympathy, with the individual stating he was only following the Payroll Tax legislation, which allowed no room for any discretion. The individual agreed that the client’s past lodgement history was exemplary, and the circumstances were unforseen, but stated that the business could have employed means to ensure the payment was made on time, such as using an automated/scheduled bank transfer and as such the penalty stood.
What this experience has taught both us and our client other small businesses should heed is the following:
Payroll Tax returns are only considered lodged once the actual return and payment are both received.
The OSR appears to be disconnected with small business and does not understand the pressures and unique situations that a small business is up against regarding cash flow.
There is inconsistency with the discretion shown regarding the amount of time between the due dates of the returns and when an Assessment Notice is issued. This was admitted in both conversations.
There is very little discretion when deciding on the Objection.
The 25% penalty is excessive and makes the ATO penalties look reasonable!
While many of our colleagues and fellow firms have been shocked by this experience and some are still in sheer disbelief of the size of the penalty, and lack of discretion shown by the NSW OSR, it has left us all wondering the same thing… Was it just an easy money grab?