In June 2019, ABC Pty Ltd received notification of a tax shortfall penalty of $6,500 from the ATO for making a false and misleading statement on their FY2016/17 company income tax return.
Can ABC Pty Ltd deduct the tax shortfall penalty?
Penalties or fines imposed for breaches of the law are specifically excluded from deduction under ITAA 97 s 26-5. Accordingly, the tax shortfall penalty is non-deductible (ID 2001/221).
Consequently, ABC Pty Ltd would not be able to claim a deduction for the $6,500 tax shortfall penalty.