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Penalties & Interest

What Counts as a "Reasonable Excuse" for a Late Tax Return?

Reviewed by , Registered Tax Agent 26188040Published 2 March 2026 · Last reviewed 26 March 20262 min read

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 →

A reasonable excuse for a late tax return is a circumstance genuinely beyond your control - serious illness, natural disaster, family crisis, or events like fraud or system failures - that directly prevented you from lodging on time. Where the ATO accepts a reasonable excuse, Failure to Lodge penalties can be remitted entirely, though any tax owed remains payable. The full catch-up process for overdue tax returns is set out in our service guide.

Excuses that succeed

  • Serious illness or injury - yours, or a dependant you were caring for, around the lodgement period
  • Mental health conditions - increasingly recognised, particularly with treating-practitioner support
  • Natural disasters - floods, fires and cyclones affecting your records, home or business
  • Family breakdown, domestic violence or bereavement
  • Circumstances outside your control - records destroyed, identity fraud, serious agent failure (safe harbour may apply)

The common thread: the event explains the specific period of non-lodgement, and you acted within a reasonable time once it passed.

Excuses that fail

Being busy, finding tax confusing, not having the money to pay (lodging and paying are separate obligations), forgetting, or relying on a partner who "usually handles it." These aren't fatal to remission - they just need to be reframed around the genuine underlying circumstances, which usually exist when someone falls years behind.

How to actually use a reasonable excuse

It isn't a box you tick at lodgement; it's an argued application supported by evidence, submitted after the overdue returns are lodged. The framing matters: a chronology connecting events to lodgement periods, with documents attached, is what decision-makers act on. This is precisely the work TaxNudge does in every penalty engagement.

Frequently asked questions

Does a reasonable excuse cancel my tax debt?
No - it removes or reduces penalties. The underlying tax remains, though payment plans and interest remission can address it.
Is depression or anxiety a reasonable excuse?
It can be, particularly with supporting evidence from a treating professional covering the relevant period.
Do I need a lawyer?
No - a registered tax agent handles remission applications, and that's the standard pathway.

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.

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