Deductions On Shortfall Penalities

Q&A Tax

Question :

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? 

 

Answer :

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. 

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