Q&A Tax Returns Amendments Spotlight

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 11^th October 2016, the two-year amendment period starts on the 12^th October 2016 and ends two years later on the 11^th 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.

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2016/2017 Lodgement Program

When you use a tax agent such as GeersSullivan to prepare and lodge your Tax Returns, Fringe Benefits Tax Returns and Activity Statements, you benefit from an extension of the due dates to lodge these documents. For example, if you prepare your own tax return using the Tax Pack or e-Tax software you will have to lodge your return by the 31st October each year. Depending on your circumstances you can have this extended to as far out as May the following year if you are with a registered tax agent. Another example of this is the automatic four week extension on the due date for lodging quarterly Business Activity Statements.

These lodgement concessions serve a number of important purposes and assist us in spreading our workload throughout the year. They can also be used to assist in managing the cashflow of your business by deferring lodgement and payment to the latest possible date.

We at GeersSullivan work with our clients who for whatever reason are unable to meet the Tax Office’s due dates. However legislative changes has put more onus on us to act as the Tax Office’s ‘police’.

As of 1 July 2013, tax agents are required to lodge 85% or more of their clients’ current year returns by the lodgement program due date, or by the deferred due date if a deferral is granted. It should be noted at this point that even if you don’t think you need to lodge a return with the Tax Office for whatever reason (i.e. your income is too low or you have moved overseas), you still need to lodge a form to advise them of this otherwise you will be considered an overdue return.

Overdue returns are charged a flat penalty of $180 per month for each month they are overdue up to a maximum of $900, plus any interest on overdue tax for individuals and small business entities. Large business entities can be up to as much as $4,500 plus any interest on overdue tax.

If the agents’ yearly averaged performance percentage does not meet the 85% benchmark, the Tax Office can remove access to the concessional lodgement program. As these concessions are fundamental to the functioning of a tax agents business, the threat of losing its concessions has forced many agents to review their client lists and remove those clients that aren’t actively working with their agents to bring their outstanding returns up to date. The Tax Office has encouraged this by providing a mechanism to delete bulk clients from lodgement lists.

Although the majority of our clients are up to date, if you do have concerns that you are behind or unable to meet the upcoming due dates, we encourage you to discuss this with us prior to the due date so we can make alternate arrangements with the Tax Office and allow us as a firm to continue to provide you with the extended dates to lodge your returns.

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