Reference Guide · Updated 1 September 2026
Safe Harbour & FTL Penalties, a tax-agent's guide
How section 284-75 of the Tax Administration Act protects your clients from administrative penalties caused by an agent mistake, how failure-to-lodge penalties are calculated and capped, when the tax-agent lodgement program saves you, remission requests under PS LA 2011/19, and your own Code-of- Conduct exposure under TASA.
Step 1, The Safe-Harbour Rule
TAA Schedule 1, section 284-75
Section 284-75(5) of Schedule 1 to the Tax Administration Act 1953 says a client is not liable for the failure-to-take- reasonable-care administrative penalty (which would otherwise arise under s284-75(1)) where the shortfall or false or misleading statement is the result of the registered agent's failure to take reasonable care, and the client themselves took reasonable care to comply. Section 284-75(6) extends comparable protection to late-lodgement penalties caused by the agent.
Practitioners refer to this as the “safe harbour”, it shifts liability from client to agent. The client's penalty is removed; the agent's separate exposure under TASA continues. Crucially, the protection does not apply if the client withheld information or did not take reasonable care themselves. The burden of proving the conditions sits with the client and the agent.
Agent-caused failure of reasonable care
The shortfall amount, or the false or misleading statement, must be the result of the registered tax agent's or BAS agent's failure to take reasonable care, not the client's. Bare disagreement between client and ATO is not enough; there must be an identifiable agent failing.
Client took reasonable care
The client must show they took reasonable care to comply, including by engaging a registered agent, providing all relevant information, responding to queries fully and accurately, and reviewing what they signed.
Registered agent (not unregistered)
Safe harbour is only available where the work was done by a TPB-registered tax agent or BAS agent. Using an unregistered preparer (a cousin, a bookkeeper without BAS-agent registration) defeats the safe-harbour argument.
Information provided in full and on time
The protection falls away if the client withheld facts, delayed providing documents past sensible cut-offs, or signed declarations without reading them. The Commissioner reads s284-75(5) strictly on this point.
All four conditions are conjunctive, the Commissioner reads s284-75(5) strictly. Documentary evidence on each leg is what wins these requests.
Step 2, What “Reasonable Care” Means for the Client
The client's leg of the safe-harbour test
ATO Practice Statement PS LA 2012/5 sets out the framework for the reasonable-care standard. The client must do more than hand over a folder of receipts, they need to show active participation in the preparation process.
| What a reasonably careful client does | Why the Commissioner looks for it |
|---|---|
| Provides all relevant information to the agent | Direct fail of s284-75(5) reasonable care if income, deductions, or asset disposals are withheld. |
| Responds to agent queries fully and accurately | The Commissioner reviews email and document-portal records, silence in response to a direct question is fatal. |
| Does not knowingly conceal income, deductions, transactions | Concealment generally takes the matter beyond “failure to take reasonable care” into recklessness or intentional disregard, different penalty altogether. |
| Signs declarations only after reviewing the draft | The s388-75 declaration is the client's representation that the return is true and correct. A glance-and-sign approach can defeat safe harbour. |
| Engages a competent registered agent (not unregistered) | Engaging an unregistered preparer takes the client outside s284-75(5) altogether, the protection only applies where the work was done by a TPB-registered agent. |
A client who reads documents superficially, ignores follow-up emails, or signs without proper review is unlikely to satisfy the reasonable-care leg, and the agent's mistake will not save them.
Step 3, Failure-to-Lodge (FTL) Penalty
How the FTL calculation works
Section 286-75 of Schedule 1 imposes an administrative penalty for failure to lodge a return or statement on time. The penalty unit (PU) is $364 from 1 July 2026 (indexed every three years by regulation). The formula is 1 PU per 28-day period (or part thereof) the lodgement is late, capped at 5 periods. Medium and large entities pay multiples of the base figure.
Cap: 5 penalty units = $1,820
- Threshold
- Turnover under $1 million; individuals and most small businesses
- Multiplier
- 1 × penalty unit per 28-day period (or part)
- Maximum
- 5 penalty units = $1,820
- Notes
- The default tier. Captures sole traders, small companies, most trusts and most BAS-lodging entities below the medium threshold.
Cap: 10 penalty units = $3,640
- Threshold
- Turnover $1m to $20m; medium PAYG withholders
- Multiplier
- 2 × penalty units per period
- Maximum
- 10 penalty units = $3,640
- Notes
- Doubles the per-period penalty. Medium PAYG-W status (large monthly withholder) can also trigger this tier even where turnover sits in the small band.
Cap: 25 penalty units = $9,100 (and 500 PU for SGEs)
- Threshold
- Turnover $20m+; significant global entities
- Multiplier
- 5 × penalty units per period
- Maximum
- 25 penalty units = $9,100 (and 500 PU for SGEs)
- Notes
- Quintuples the per-period figure. Significant Global Entities face the dramatically higher SGE cap (up to 500 PU per return = $182,000), this is where unremitted FTL becomes commercial. Penalty unit $364 per unit, effective 1 July 2026, verified 1 September 2026.
Worked example, small-entity company
Small company tax return due 28 February. Lodged 30 April, that is 2 × 28-day periods (or part) late. Calculation: 2 PU × $364 = $728. The cap is 5 PU ($1,820) so the small entity has 3 PUs of headroom before the cap bites. If the same return were lodged 90 days late, the calculation runs to 4 PU ($1,252). Only once the lodgement exceeds 5 × 28 days = 140 days does the cap apply.
Run your own figures in the FTL penalty and GIC calculator, or check the AU tax lodgement deadline calendar for the due date that starts the clock.
Step 4, The Tax-Agent Lodgement Program
Concessional due dates for agent-lodged returns
The ATO publishes an annual lodgement program for TPB- registered tax agents and BAS agents. It allows clients of registered agents to lodge later than the standard self- lodgement deadlines, most visibly, individuals shift from a 31 October cut-off to a mid-May / early-June date. Access to the concessional schedule depends on the agent's overall compliance performance and on the client being added to the agent's list before the original due date.
| Return type | Self-lodge | Agent-lodged | Notes |
|---|---|---|---|
| Individual ITR, no prior late lodgements | 31 October | 15 May / 5 June (following year) | The flagship concession, about 7 months of additional time. Lost if the client is added to the agent's list after the original due date or if prior-year returns are still outstanding. |
| Company tax return (Jun balancer, small) | 28 February | 15 May (subject to compliance history) | Concessional date applies where prior years are up to date. Companies with payable returns generally face an earlier 'with payment' date. |
| Trust tax return | 31 October | 15 May (following year) | Aligned with the individual concession in most cases. Larger trusts may sit on an earlier date depending on assets and prior compliance. |
| BAS, quarterly (electronic, tax-agent lodged) | 28 days after quarter-end | +2 weeks (4 weeks total after quarter-end) | The two-week electronic-lodgement concession is what makes BAS-agent and tax-agent quarterly lodgement viable for most SMEs. |
| FBT return (year-ended 31 March) | 21 May | 25 June (tax-agent lodged electronically) | Roughly 5 weeks of extra time. The concession is conditional on prior FBT compliance. |
Indicative dates. Always check the current ATO lodgement program for the relevant year, dates shift slightly each program cycle, and individual circumstances (size, prior late lodgements, payable status) can pull a return onto an earlier schedule.
Step 5, Remission of FTL Penalty
Asking the Commissioner to let it go
Section 298-20 of Schedule 1 gives the Commissioner a broad discretion to remit administrative penalties in whole or in part. PS LA 2011/19 sets out the policy. Practically, FTL is the most remittable penalty in the system on the right facts , but you have to ask. The application is made via the ATO portal's “objection or remission” pathway with a written explanation and supporting documents. Typical response time is 4 to 12 weeks.
One-off slip with clean history
Long compliance track record, a single missed deadline, prompt rectification. The Commissioner's stated preference is to fully remit FTL in genuine one-off cases, but the agent has to ask in writing.
Exceptional circumstances
Natural disaster, serious illness or hospitalisation, family bereavement, fire, flood. Documentary evidence is essential, medical certificates, ATO disaster postcode lists, insurance claims.
Genuine error not amounting to non-compliance
Technical issue, lost notice, wrong address on file at the ATO, agent's online services outage during the deadline window. Contemporaneous evidence (screenshots, support tickets) carries the day.
Genuine attempt to comply
Lodgement was a few days late despite reasonable effort, for example, lodged within 7 days of the due date with a credible explanation. Partial remission is common here.
Agent error + safe harbour
Where the failure was the agent's, request remission under PS LA 2011/19 in parallel with a s284-75(6) safe-harbour application. The two pathways are complementary and should be filed together.
Hardship and ability-to-pay
Documented financial hardship can support remission of the penalty even where the lodgement failing itself doesn't meet the other grounds. Provide cash-flow statements and any payment-plan history.
The remission application, what goes in the file
- Written explanation, tightly drafted, identifying which PS LA 2011/19 ground applies and why the facts fit it.
- Supporting documentation, medical certificates, ATO disaster postcode confirmation, insurance claims, screenshots of system outages, prior-year lodgement history.
- Parallel safe-harbour request, where the cause was agent error, file s284-75(6) at the same time. The two pathways reinforce one another.
- Compliance history snapshot, ATO can see this internally, but it pays to lead with the client's clean record where one exists.
- Hardship statement (if relevant), short cash-flow summary, payment plan history, any debt arrangements.
Step 6, Your Own Exposure under TASA
Safe harbour saves the client, not the agent
The Tax Agent Services Act 2009 sets out a 14-item Code of Professional Conduct. Code item 9 requires that you take reasonable care to ensure that taxation laws are applied correctly to the circumstances in relation to which you are providing advice. When a client receives safe harbour because of your error, the same facts that produced the safe-harbour grant can be referred to the Tax Practitioners Board for Code investigation. The TASA 2023 reform package, including the new Code item 14 on false or misleading statements to the Commissioner, materially expanded both the obligations and the penalty caps.
Written caution
The TPB records the caution against the agent's registration. Visible on internal TPB systems, but not necessarily on the public register. Often paired with an undertaking.
Order to undertake further education
TPB nominates topics (commonly ethics, Code item 9, breach reporting) and a deadline. Failing to complete is itself a further breach.
Suspension of registration
Stops the agent providing tax-agent services for fee or reward. Recorded on the public register. Practical impact: clients re-allocated, lodgement program lost.
Termination of registration
Removal from the register. The agent cannot apply for re-registration for up to 5 years. Often paired with referral to the Federal Court for civil penalties.
Civil penalties (TASA Part 6)
Court-imposed civil pecuniary penalties for serious or repeated breaches. The TASA 2023 reform package lifted these caps significantly.
False or misleading representation to TPB
Distinct head of penalty for materially false statements made to the TPB itself, for example, on registration renewal, in response to a TPB notice, or in a breach report.
Civil penalty figures are the per-contravention caps that applied as at 2025 (TASA Part 6, indexed). Repeated breaches multiply, and the Federal Court has discretion within the cap.
Step 7, Practical Scenarios
How the rules play out in real files
Safe harbour and FTL remission look clean on paper. In practice they turn on a small number of recurring fact patterns. The scenarios below capture the most common outcomes.
Scenario A, clean safe-harbour application
Agent overlooks a CGT main-residence partial exemption that would have reduced the client's tax by $4,500. Client had provided every document, including the property sale contract. ATO assesses a 25% shortfall penalty of $1,125 (failure to take reasonable care). Client requests safe harbour under s284-75(5). The Commissioner grants it, the client took reasonable care; the failure was the agent's. The client's $1,125 penalty is remitted in full. The agent faces a separate TPB enquiry under Code item 9, but the client is protected.
Client penalty: $0. Agent: TASA exposure remains.
Scenario B, safe harbour fails
Client receives interest from a foreign bank account but does not tell the agent and does not include it on the questionnaire. The agent has no other way of knowing. The ATO data-matches the foreign interest, assesses a shortfall penalty at the 75% intentional disregard rate. Client requests safe harbour. Refused, the client did not take reasonable care (failed to disclose income they knew about). Safe harbour is not a substitute for client honesty.
Client penalty: stands. Agent: no TASA exposure.
Scenario C, late lodgement, agent at fault
BAS Q3 due 28 February. Agent's bookkeeper queued the lodgement but a system error meant it sat unsubmitted. Lodged 8 March (within the first 28-day period, so 1 PU). FTL penalty = $364. Agent applies for safe harbour under s284-75(6) and remission under PS LA 2011/19 on the same form. Commissioner remits in full and records the matter. Agent's lodgement program statistics take a small hit but the client wears nothing.
Client penalty: $0. Agent: minor lodgement-program flag.
Defensive practice for agents
Six habits that make safe-harbour and remission requests winnable, and Code-item-9 investigations defensible.
Comprehensive intake questionnaire
Year-by-year coverage of all income sources, deductions, asset disposals, related-party transactions, foreign income, crypto, rental properties. The questionnaire is your evidence the client was asked. Re-issue it annually, don't roll forward last year's.
Engagement letter that names reasonable care
Engagement letter expressly states the client must provide all relevant information and review draft returns before signing. Reference TASA Code item 9 and s284-75. This is the document the Commissioner reads first.
Workflow software with audit trail
Use a practice system (OneBookPlus, FYI Docs, FuseSign, Karbon) that timestamps every email, document upload, and client review. When safe harbour is contested 18 months later, the audit trail is the case.
Information-complete confirmation
Before lodgement, require a client tick or signature confirming that information is complete and the draft has been reviewed. This is what tips a marginal s284-75(5) case in the client's favour.
Annual update letter
A short pre-tax-time letter reminding clients of new rules, common missed deductions, and the obligation to disclose all income. Free, fast, and shifts the reasonable-care needle measurably.
Professional indemnity insurance
TPB requires PII for registered agents. Typical cover is $1m to $5m for small practices, scaling with revenue. Check the policy actually covers TPB-investigation defence costs, not just civil-suit damages.
Common mistakes
Recurring errors that cost clients money and put agents in the TPB's sights.
Not requesting safe harbour because it 'looks bad'
Some agents avoid lodging s284-75(5) requests because they think it advertises an error. It does not, the safe-harbour file is between the client and the Commissioner. Failing to ask leaves the client paying a penalty they shouldn't.
Lodging without a complete client declaration
If the client hasn't signed the information-complete or reviewed-the-draft step, you are vulnerable on the reasonable-care leg of s284-75(5), the client's leg, not yours. Always close the loop in writing.
Letting lodgement program statistics deteriorate
Concessional dates depend on the practice's on-time lodgement percentage. A run of late lodgements drops the practice out of the concessional schedule for the next program year, affecting every client.
Not appealing FTL where remission is genuine
FTL is the most remittable penalty in the system on the right facts. Treat each one as a remission candidate before paying. Even partial remission saves the client material money.
Treating safe harbour as a defence to TASA
The client's safe harbour does not extinguish your obligations under Code items 9 (reasonable care) and 11 (competence). The TPB can, and does, investigate the agent regardless of whether the client got safe harbour.
Practical tips
Lodge safe-harbour with the objection
Where you are also objecting to the underlying assessment or penalty, file the s284-75(5) or s284-75(6) request in the same package. The Commissioner reviews them together and it removes the risk of one pathway being decided without sight of the other.
Keep a per-client reasonable-care file
For each client, store the signed questionnaire, the engagement letter, the document-portal log, and the signed-off draft. If safe harbour is contested 18 months later, you want one folder to send the Commissioner, not a hunt through inboxes.
Apply within 60 days of the penalty notice
Remission applications are not strictly time-barred but the ATO weighs promptness in deciding. Sixty days is a sensible internal SLA, long enough to gather supporting documents, short enough that the file is still fresh.
Monitor your lodgement program %
Concessional dates are a per-practice privilege, not a per-client one. A small handful of late lodgements can drop your practice off the concessional schedule for the next program year, affecting every client on your books. Review the metric monthly.
Frequently Asked Questions
What is the safe-harbour provision in section 284-75?
Section 284-75(5) of Schedule 1 to the Tax Administration Act 1953 protects a client from the failure-to-take-reasonable-care administrative penalty where the shortfall (or false or misleading statement) was caused by their registered tax or BAS agent's failure to take reasonable care, provided the client themselves took reasonable care, including by engaging a registered agent and providing all relevant information. Section 284-75(6) extends similar protection to late-lodgement-related penalties where the agent caused the failure. The client must show the conditions are satisfied; it is not granted automatically.
How much is the failure-to-lodge penalty in 2026?
The penalty unit (PU) is $364 from 1 July 2026, indexed every three years. FTL is calculated at 1 PU per 28-day period (or part) that the return is late, capped at 5 periods. Small entities pay 1× ($1,820 maximum), medium entities pay 2× ($3,640 maximum), and large entities pay 5× ($9,100 maximum on the standard cap, significantly higher for significant global entities). A two-month-late small-entity company tax return is therefore 2 PU × $364 = $728.
Does the safe harbour protect the tax agent or just the client?
The client. Safe harbour shifts liability for the administrative penalty away from the client, but it does not extinguish the agent's exposure under TASA. The agent can still be investigated by the Tax Practitioners Board for breach of Code item 9 (reasonable care) or item 11 (competent service), face sanctions up to suspension or termination, and be exposed to civil penalties under Part 6 of TASA. Effectively, the rule trades a client penalty for an agent risk.
Can FTL penalties be remitted?
Yes. The Commissioner has a broad discretion under section 298-20 of Schedule 1 to remit administrative penalties in whole or in part. PS LA 2011/19 sets out the policy. The most common successful grounds are a one-off slip with otherwise good compliance history, exceptional circumstances (illness, bereavement, natural disaster), a genuine attempt to comply (lodged within a few days of the deadline), agent error supporting a parallel safe-harbour request, and documented financial hardship. Apply in writing via the ATO portal's 'objection or remission' pathway; expect a 4 to 12 week response time.
What is a tax-agent lodgement program?
Each year the ATO publishes a lodgement program that grants registered tax agents and BAS agents concessional due dates for their clients' returns, for example, individual returns by 15 May (or 5 June) rather than 31 October, FBT returns by 25 June rather than 21 May, and an extra two weeks for electronically lodged quarterly BAS. To benefit, the client must be added to the agent's list before the original due date and the practice must maintain a satisfactory on-time lodgement percentage. Concessional access can be lost if the practice's non-lodgement metrics deteriorate.
What are my obligations under TASA Code item 9?
Code item 9 of the TASA Code of Professional Conduct requires that you 'take reasonable care to ascertain a client's state of affairs, to the extent ascertaining the state of those affairs is relevant to a statement you are making or a thing you are doing on behalf of the client.' In practice: make active inquiries rather than accept client figures at face value, follow up obvious gaps, document the questions asked and answers received, and don't lodge until information is complete. Failing item 9 is the most common safe-harbour-adjacent breach the TPB acts on, and the most common ground for sanction.
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Reviewed by Bishal Shrestha
About the author
Bishal Shrestha
Founder & CEO, OneBookPlus
Bishal spent a decade running digital projects for Australian small businesses before founding OneBookPlus. He writes and maintains these pages, and publishes what OneBookPlus does not do alongside what it does.
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