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Amendment period changes are upon us. So far you could assume a 2-year amendment period for most SMEs. Not anymore.
Amendment Period Changes
Amendment periods are important for our work. Once past an amendment period, you can’t lodge an amendment unless you apply for the commissioner’s discretion.
But what are these amendment periods after the update of Regulations 2015?
This is what Andrew Henshaw of Velocity Legal in Melbourne discusses with you in this episode. Here is what we learned but please listen in as Andrew explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
Amendment Period Changes
So far as a small to medium business, you could assume an amendment period of 2 years. Not anymore. With the update of Regulations 2015 coming into effect from 1 July 2021, you really need to look at what this SME is doing.
Regulations 2015
s170 ITAA 1936 has a table that lists the amendment periods for various scenarios with many qualifications and then it refers to ITAA 1936 Regulations 2015 as the final catch-all.
These Regulations 2015 have now been updated and this is what this episode is about. The draft update was issued in August 2022 and finalised in November 2022. The updated Regulations 2015 apply from 1 July 2021.
The ITAA 1936 Regulations 2015 cover various things, not just amendment periods.
Trusts and Companies
Trusts and companies start with 4 years and will only change to 2 years if they run a small business (turnover less than AUD 50m). So entities that don’t run an SME and for example only have passive income will have an amendment period of 4 years.
But now with the update of Regulations 2015 there are a lot of carve-outs. So assume a 4-year amendment period unless it is a simple individual tax return just with employment income.
Carve-Outs
After the update of Regulations 2015, a 4-year amendment period will now apply to the following carve-outs:
1 – Related Party Dealings
If a transaction between related parties results in an amount of at least AUD 200,000 of assessable income or deductions or a CGT event with capital proceeds or cost base of at least AUD 200,000 for anybody involved, then the amendment period is 4 years.
The same applies if you have related-party dealings in relation to assets or non-cash benefits with a market value of at least AUD 50,000, you have a 4-year amendment period.
If you don’t deal at arms’ length with related parties, it is 4 years in any case.
2 – Foreign Source Income
If anybody derives assessable income of at least AUD 200,000 from foreign sources, they have a 4-year amendment period.
This includes any entity affiliated with or connected with the entity to avoid ‘funny business’ trying to circumvent the threshold.
This only applies to residents since non-residents have a 4-year amendment period anyway (see below).
3 – Foreign Residents
If you are a foreign controlled Australian company, trust or partnership or you are a non-resident entity at any time during the income year, you have a 4-year amendment period.
4 – DPT and MAAL
If you engage in schemes captured by either the Diverted Profits Tax (DPT) or Multinational Anti-avoidance Law (MAAL), you have a 4-year period.
5 – Complicated Structures (10 Entities)
If you are connected or affiliated with at least 10 other entities at any time during the assessment year, 4 years.
6 – R & D
If you are entitled to the R&D tax offset or certain related deductions, recoupments and adjustments, then you have a 4-year amendment period as well.
So if you claim a tax deduction for R & D expenses or claim the R & D tax offset, both trigger a 4 year amendment period.
The offset is clear – you know whether you got the offset or not. But the deductions of R & D expenses is hazy.
7 – CGT Reliefs
If you claim the following CGT reliefs:
- Div 615 Interposition of a company with multiple shareholders
- Subdivision 126B Interposition of a company between partners of a partnership
- Div 125 Demerger
- Restructure rollover relief
- Rollovers relating to CGT asset transfers between two companies or the creation of a CGT asset between companies within the same wholly owned group, where one company is a non-resident; and
- Entities subject to Division 855 (where a foreign resident can disregard a capital gain or loss in certain circumstances). If you have a capital gain or loss that is disregarded under Div 855, then 4 years apply. Non-residents already have a 4-year amendment period, so this rule looks like a double-up.
You have a 4-year amendment period.
Summary
If you meet any of these conditions, then you have a 4-year amendment period even if you qualify as a small to medium business.
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Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 16 January 2024
