Penalties and interest: Shortfall penalties
What are shortfall penalties?
Shortfall penalties apply to most taxes and duties. The exceptions are student loan repayments and child support repayments by liable parents. A shortfall penalty is one imposed as a percentage of a tax shortfall (a deficit or understatement of tax), resulting from certain actions on the part of a taxpayer. The law divides these actions into five categories of fault or breach, with a specified penalty rate for each category.
The five categories are:
- lack of reasonable care
- unacceptable tax position
- gross carelessness
- adopting an abusive tax position
- evasion.
The penalty increases in proportion to the seriousness of the breach.
| Breach | Standard Penalty (% of tax shortfall) |
|---|---|
| Lack of reasonable care | 20% |
| Unacceptable tax position | 20% |
| Gross carelessness | 40% |
| Abusive tax position | 100% |
| Evasion | 150% |
These breaches are described in more detail on the following data.
Date published: 30 Aug 2006
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