A taxpayer who files an inaccurate or incorrect tax return is liable to pay a penalty on the tax shortfall amount resulting from the inaccurate or incorrect reporting, calculated at the rate of 75% (in cases involving intentional disregard), 50% (in cases of recklessness) and 25% (in cases of absence of reasonable care).
Where there is no shortfall amount, penalties may still apply equal to 60 penalty units (in cases involving intentional disregard), 40 penalty units (in cases of recklessness), and 20 penalty units (in cases of absence of reasonable care).
The above amounts may be increased or reduced if there are aggravating or mitigating circumstances. In cases where reasonable care was taken, no penalties will apply.
Where a corrected return results in increased tax liability, a shortfall interest charge (SIC) is applied. The SIC interest rate is based on the quarterly average Reserve Bank 90-day bill acceptance rate plus 3%. SIC is applied on a daily compounding basis. The SIC annual rate for the fourth quarter of the income year 2021-22, i.e., the quarter April to June 2022, is 3.07% (previously 3.04% for the quarter January to March 2022).