6.4.3.10 Valid reasons for not lodging a tax return
Summary
This topic outlines the reasons why an individual and/or their partner may not be required to lodge a tax return for the relevant income year (1.1.R.23).
Valid reasons for not lodging a tax return
The criteria outlined by the ATO at the beginning of each tax year for determining whether an individual is required to lodge a tax return for that year are used to determine whether or not an individual and/or their partner has a valid reason for not lodging a return.
Generally, an individual should lodge a tax return if they have assessable taxable income.
You can find more information about income thresholds and other income tax information on the ATO website.
Not required to lodge an income tax return - requirement to declare
An individual who receives FTB (and/or their partner), are required to notify Centrelink they are not required to lodge an income tax return, if they are not required to do so, within 12 months from the end of the relevant income year (1.1.I.75).
When an individual notifies they or their partner are not required to lodge an income tax return they will be required to confirm their actual income details for the year. If the individual is not a member of a couple and informs Centrelink that they are not required to lodge and declares their actual ATI, the payments for that income year will be reconciled. If the individual who receives FTB is a member of a couple and informs Centrelink that neither party is required to lodge and declares the family's actual ATI, the payments for that income year will be reconciled. If only one member of a couple is required to lodge, the payments for that income year will be reconciled after the required party lodges and the individual who receives FTB declares the actual ATI of the party not required to lodge.
Declaration must be reasonable
Centrelink must be satisfied that the 'not required to lodge' declaration is reasonable, taking into account the reason for the declaration, the nature of the income components being declared and the individual's (and/or their partner's) income circumstances for past income years.
Possible reasons for an individual's notification to be considered unreasonable could be evidence of:
- income higher than the tax free threshold
- the individual being a child support payer/payee, or
- income components for which the individual would need to lodge a tax return to obtain the benefit of (e.g. net financial investment losses).
The individual may be asked to obtain evidence from the ATO that they are not required to lodge.
Example: If the individual has for several years had a yearly income above the tax free threshold and there is some evidence this has not changed, Centrelink may decide not to accept their declaration and refer the individual to the ATO for assessment.
The actual income used by Centrelink must be accepted by the individual.
Explanation: Centrelink staff may assist the individual in working out their actual income for the relevant income year, however the individual is legally responsible for providing their actual income amount and therefore must be satisfied with the figures they provide.
If Centrelink considers that the final income is not reasonable, staff may decide not to accept the not required to lodge declaration. If so, in order for the individual's entitlement to be reconciled, they will have to either:
- lodge a tax return
- complete a non-lodger advice form with the ATO, or
- provide a revised declaration of income.
If the individual does not do any of the above, they will be subject to the non-lodger process.