Increased amendment period for small and medium businesses
A measure aimed at reducing the burden on small and medium businesses wishing to revise their income tax returns, from 1 July 2024, the 2-year amendment period for small and medium businesses' income tax returns will be extended to 4 years.
Treasury has provided draft legislation on a May 2023 Federal Budget measure to extend your businesses 2-year amendment period to 4 years for income tax returns.
Small and medium business entities
You are a small or medium business entity for an income year if you:
carry on a business during the income year, and
one or both of the following applies:
the aggregated turnover of your business in the previous income year was less than $50 million, and/or
your business's aggregated turnover for the current year is likely to be less than $50 million.
Current amendment period
The period during which the Australian Taxation Office (ATO) may amend an assessment for businesses your size is 2 years. The amendment period applies from the day on which the ATO gives you a notice of assessment.
Proposed amendment period
The draft legislation proposes an amendment to allow the ATO to amend the tax return for your business, upon your request, within 4 years after the day on which the ATO gave you a notice of assessment. The application for an amendment must be in the approved form and given to the ATO before the expiry of the 4-year period.
The additional time is intended to reduce the administrative burden on your business if you need to amend your tax return, as well as on the ATO. The current 2-year period is considered too short, as outside of this window you would otherwise have to engage in costly and lengthy objections and appeals processes with the Commissioner of Taxation.
Note that the Commissioner may only amend your assessment to give effect to the decision on your application. As such, the provisions will not allow the Commissioner to amend your assessment about other items not included in the application. This is to ensure that sufficient certainty is still afforded to you, as the 4-year period only applies in respect of those particulars mentioned in your amendment application.
What doesn't change
Despite this proposed change in legislation, there is no change to the length of time you are required to keep records for your business. You need to keep records for your business in case the ATO wants to audit your tax return.
For instances such as fraud and tax evasion, the Commissioner of Taxation may amend your return at any time. Generally, records are required to be maintained for 5 years from the date on which the record was prepared or obtained, or from the time the relevant transaction or act was completed, whichever is the latter.
Contact us
Please note this draft measure will be required to receive parliamentary approval before it comes into effect. In the interim, please do not hesitate to contact our office should you have any queries.
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