ATO late lodgement penalty: up to $364 per 28 days, capped at $1,820 per document · interest 11.43% p.a. compounding daily · See how to remit them →
What triggers a default assessment
Default assessments are issued under section 167 of the tax law and are the ATO's endgame for non-lodgers. They arrive only after the warnings have been ignored.
- Overdue returns sitting on your record
- Reminder letters, then a default assessment warning letter giving you a final window, usually 28 days, to lodge
- No response, so the ATO builds an income estimate and issues the assessment
The warning letter is the last cheap exit. Lodging the real return inside that window kills the whole process: the catch-up steps are here.
Why the numbers are always wrong
The estimate is assembled from what the ATO can see, which is employer reports, bank interest, contractor payment reports, property and share data, plus industry benchmarks for someone with your profile. Here is what the estimate never includes.
| Missing from the estimate | Effect |
|---|---|
| Your deductions | None allowed, not one dollar |
| Business expenses | Gross receipts treated as close to profit |
| Capital losses, offsets and thresholds properly applied | Bill inflated further |
| The 75% penalty | Added on top of the inflated tax, 90% for repeat behaviour |
A sole trader who really owed $8,000 can receive a default assessment demanding $30,000 or more. That figure then attracts general interest charge daily and moves to debt collection like any other ATO debt.
How to overturn a default assessment
Overturning a default assessment
Lodge the real return immediately
For a straightforward individual year, lodging the true return usually prompts the ATO to amend the assessment to the real figures. This alone resolves most cases.
Object if the ATO stands by its estimate
Lodge a formal objection. The critical difference from a normal dispute is that the burden of proof sits with you: you must show what the assessment should be, with evidence. Bank statements, invoices and reconstructed accounts win objections.
Attack the penalty separately
The 75% penalty is remittable and reducible once real returns are in. Voluntary engagement, health events and genuine confusion all count.
Stabilise the debt while you dispute
Objections do not pause collection by default. A payment plan on the disputed amount keeps enforcement off while the real figures are settled.
Don't let it get this far
Every stage before a default assessment is cheaper than the stage after it, and that is by design. If you have had any ATO letter about unlodged years you are already on the conveyor. Lodge, and the machine stops. Years of silence so far? Start with how far back you can lodge: the answer is all of them, voluntarily.
ATO process and penalty settings checked August 2026.
Frequently asked questions
What is an ATO default assessment?
Is a default assessment accurate?
How do I dispute a default assessment?
Can the 75% penalty be reduced?
Do I have to pay while I dispute it?
General information only - not personal tax, financial or legal advice. Consider your own circumstances or speak to a registered tax agent. Remission of penalties or interest and payment plans are decisions of the ATO and outcomes can't be guaranteed.