In December 2011, the ATO sent default assessment warning letters to taxpayers who have overdue income tax returns where there was evidence they received taxable income in the relevant financial years.

These letters were titled ‘default assessment warnings’ and are part of their ongoing work to address non-lodgement.

If the overdue returns are not lodged immediately, the ATO will issue default assessments for these clients based on the estimated taxable income included in the letter.

Taxpayers that have received an ATO default assessment may incur ‘failure to lodge on time’ penalties and administrative penalties of 75% of the tax related liability from the default assessment. This will be calculated after taking into account any pay as you go (PAYG) credits and any other tax credits available.

Please note that administrative penalties may increase by 20% if a taxpayer has had a penalty previously applied for a default assessment.