Q&A Tax Returns Amendments Spotlight
Posted on 16th August 2016 by Ashley Dawson
Q: What is the time period to amend a tax return with the ATO?
A: For individuals and entities classified as a small business for taxation purposes (sole trader, partnership, company or trust that has aggregated turnover less than $2 million), the time period to lodge an amendment to a tax return is 2 years from the day after the ATO issues you the notice of assessment, or is deemed to give a notice of assessment for entities that don’t receive one for the year in question.
For entities not classified as a small business for taxation purposes (sole trader, partnership, company or trust that has aggregated turnover higher than $2 million), the time period to lodge an amendment to a tax return is 4 years from the day after the ATO issues you the notice of assessment, or is deemed to give a notice of assessment for entities that don’t receive one for the year in question.
For example, if an individual lodges their 2016 tax return and the ATO issues a notice of assessment on the 11th October 2016, the two-year amendment period starts on the 12th October 2016 and ends two years later on the 11th October 2018.
Q: Why does the ATO place a time period to amend a tax return?
A: The time limit gives individuals and entities certainty about their taxation affairs with the inability to amend a tax assessment after the time period has passed, except in some exceptional situations such as evasion or fraud.
Q: What happens if the time period has passed but I need to amend a tax return?
A: If an individual or entity has assessable income or an allowable deduction that was omitted in a previous tax return, it is possible to still amend the return however an objection will be required to be lodged with ATO to show that it doesn’t fall within the specified time period. The first step is to lodge the amended tax return with the ATO. The ATO will reject the amended return as it doesn’t fall within the time period. The second step is to object to the ATO’s decision to not allow the amendment to occur. For the ATO to consider the objection as if it was lodged on time, the individual or entity has to explain the circumstances and reasons why the objection was not lodged within the time limit.
For example, if an individual receives a group certificate from an employer and the employer has since amended the group certificate after the individuals time period has passed, this would be an allowable circumstance as it was out of the individuals control.
Another example; if an individual lodged their own tax return including income and expenses from a rental property but didn’t include the interest on the loan because they didn’t know the interest was deductible, they may be eligible to have their previous tax return/s amended on the basis they subsequently sought taxation advice.
The time limit to lodging an objection is 60 days from the date the notice of decision was issued to the individual or entity.