Key Highlights

  • Sydney barrister Philip Bates was fined $25,000 for civil contempt.
  • The order concerned tax returns and Business activity statements covering 2014 to 2023.
  • The court rejected the argument that unlodged documents could not be produced because they did not exist.
  • The judgment in ACLEC Pty Ltd v Bates was delivered on 5 November 2026.

A Sydney barrister has been fined $25,000 for civil contempt after failing to produce years of tax returns and business activity statements, despite arguing he could not hand over documents that did not exist because he had never lodged them. The NSW Supreme Court rejected that defence. The ruling lands as the ATO chases about 2 million self-preparers who had not lodged, and as complaints about failure-to-lodge penalties rise.

What the court decided, and the defence it rejected

The case is ACLEC Pty Ltd v Bates (Penalty) [2026] NSWSC 1385, with judgment delivered on 5 November 2026.

The barrister, Philip Bates, was found to be in civil contempt for failing to produce his business activity statements and tax returns covering 2014 to 2023.

The penalty was calculated on a daily basis. it was set at $100 a day for the failure to produce from 10 March to 15 June 2026, and $150 a day from 16 June.

The total fine was $25,000. Mr Bates was also ordered to pay Indemnity costs, which are generally a higher level of costs than a losing party would usually be ordered to pay.

Mr Bates argued that he was not in contempt, because the returns he had been ordered to produce did not exist. He had not filed them.

Chief Judge in Equity Hammerschlag rejected that argument.

The judge also described Mr Bates's apology to the court as "mealy-mouthed".

The published report does not set out every step of the court's reasoning. But the outcome makes one thing plain: telling a court that the documents were never prepared did not excuse the failure to comply with its orders.

How the daily penalty adds up

Courts in civil contempt matters can structure a fine in different ways. Here, the court used a daily rate that stepped up over time, which increases the cost of continuing non-compliance.

Civil contempt sanctions are generally aimed at securing compliance with a court's orders, rather than only punishing past conduct. That helps explain why a fine may build for each day an order is ignored.

Hypothetical example: suppose a person is ordered to produce documents and fails to do so for 40 days at a rate of $100 a day, then a further 20 days at $150 a day.

The first period costs 40 × $100 = $4,000. The second period costs 20 × $150 = $3,000. The total fine would be $4,000 + $3,000 = $7,000.

If that person kept failing to comply for another 30 days at $150, the total would rise by 30 × $150 = $4,500, to $11,500.

This example uses invented numbers to show how a stepped daily rate works. It does not reproduce the court's own calculation in the Bates matter, and costs orders would come on top.

Why lodging matters even when you think you owe nothing

For most people, the legal obligation to lodge a tax return is separate from whether any tax is owed. Under long-standing tax law, people who are required to lodge must do so by the due date, whether or not they expect a bill.

The ATO's message at the end of tax time was blunt. In a release dated 19 October 2026, it said it had received about 9 million returns, while about 2 million self-preparers had not yet lodged.

The ATO said failure-to-lodge penalties can reach $1,820. It also said myTax takes an average of eight minutes for people with simple affairs.

Long-standing record-keeping rules generally require individuals to keep records supporting their returns for five years from lodgment.

Complaints about lodgment penalties are rising

The Bates case is unusual because it involved a court order in private litigation, not an ATO penalty. But it sits against a wider rise in disputes about non-lodgment.

The Tax Ombudsman's Complaints Insights Report for April to September 2026, dated 27 October, recorded 2,376 complaints, up 74% from 1,362 a year earlier.

Complaints about penalties for failing to lodge a return made up 11% of penalty and interest complaints, up 7 percentage points. Some taxpayers said they had relied on their agent's advice.

The report also found that 82% of complainants were unrepresented individuals.

Penalties or interest were reduced or remitted in 5% of complaint cases, down from 17%.

Penalties and interest accounted for 18% of the Ombudsman's investigations by issue, behind payments to taxpayers and Debt collection, which were each 19%.

Tax Ombudsman Ruth Owen has also been critical of how the ATO treats people who owe tax. She said: "I sometimes see that the way they treat people who are owing tax isn't fair and reasonable."

What the case means for professionals and taxpayers

For legal and other professionals, the case is a reminder that tax compliance can surface in unexpected places. Here it emerged through document production orders in civil proceedings, not an ATO audit.

For anyone with unlodged years, the general position is that the problem tends to grow with time. Penalties, interest on any debts and the practical difficulty of rebuilding records can all increase.

The ATO generally encourages people who are behind to contact it or a registered tax agent. Voluntary disclosure before the ATO starts an audit is generally treated more favourably than a shortfall it discovers itself, under the ATO's long-standing penalty approach.

What to watch

Bills for self-preparers are "generally due 21 November", according to the ATO. That date is a Saturday this year, so check ATO guidance on whether payment the next business day, Monday 23 November, is accepted.

The ATO will keep accepting Credit card payments until 30 June 2027, under arrangements announced by the government on 9 October.

The Tax Ombudsman plans to publish trend reports every six months, and Ms Owen expects complaints to keep rising for 12 months. The next report would be expected in the first half of 2027.

Watch also for MYEFO in December, which will update the government's Revenue and compliance outlook.