What is safe harbour?

Safe harbour is legal provisions that reduce or eliminate liability in certain situations as long as certain conditions are met. Under these provisions, a client won’t be liable to some administrative penalties if they are able to provide all the relevant tax information to you. This will also only apply if you don’t take reasonable care and make a false or misleading statement that results in a shortfall amount and take reasonable care or lack reasonable care and fail to lodge a document by it’s due date.

The safe harbour provisions can only apply to a:

  • False or misleading statement penalty, where the statement is made on or after 1 March 2010;
  • Failure to lodge on time (FLT) penalty, when the document has a due date for lodgement of 1 March 2010 or later.

Safe harbour doesn’t apply where the penalty arises from recklessness or intentional disregard of the tax law by you. It also doesn’t apply to other administrative penalties, including when tax avoidance schemes are involved.

If safe harbour is approved, the ATO may then refer the matter to the Tax Practitioners Board to consider whether there has been a breach of the Code of Professional Conduct.

Eligibility for safe harbour from FTL penalty

If your return, notice, statement or other document is lodged late by your tax agent you won’t be liable for an administrative penalty for the late lodgement if you can satisfy two things. Firstly, you need to be able to show that you provided them with all relevant tax information to enable them to lodge your return, notice, statement or other document by the due date. Secondly, if failing to lodge the return, notice, statement or other document with the ATO did not result from their intentional disregard or recklessness as to the operation of tax law.