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 notify ATI
An individual who claims or receives FTB (and their partner, if they have one) is required to notify Centrelink of their ATI within 12 months from the end of the relevant income year (1.1.I.75) if they are not required to lodge an income tax return.
If the individual is not a member of a couple and notifies Centrelink of their ATI because they are not required to lodge an income tax return for an income year, their payments for that income year will be reconciled.
If the individual is a member of a couple and notifies Centrelink of their combined ATI because both they and their partner are not required to lodge an income tax return for an income year, the payments for that income year will be reconciled.
If only one member of a couple is required to lodge an income tax return, the payments for that income year will be reconciled after the required party lodges their income tax return and the individual who receives FTB notifies Centrelink of the ATI of the party who is not required to lodge.
ATI notification must be reasonable
Centrelink must be satisfied that the individual’s ATI notification is reasonable, taking into account the reason for the notification, 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 (for example, 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 notification 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 ATI for the relevant income year, however the individual is legally responsible for notifying Centrelink of their ATI amount and therefore must be satisfied with the figures they provide.
If Centrelink considers that the ATI provided by the individual is not reasonable, it may decide not to accept the notification. 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 notification of their ATI.
If the individual does not do any of the above, they will be subject to the non-lodger process.