Tax Planning Strategy 170 | Amend Prior Years Tax Returns

It is good practice to review the prior year’s tax returns of all new clients to see whether any allowable deductions have been omitted from the return. If allowable deductions have been omitted (and can be substantiated) and the time limits on income tax amendments are met, the prior year’s returns can be amended.

The time limit for amending individual and small business tax returns is generally two years, and for other taxpayers four years, from the day after the ATO give you the notice of assessment for the year in question (generally taken to be the date on the notice or, if no notice is issued then the date the relevant return was lodged).

Taxpayers subject to the four-year amendment period are:

• A taxpayer that carries on a business (or is a partner in a business) unless the taxpayer is a small business entity.
• A taxpayer in the capacity of a trustee of a trust.
• A taxpayer who is a beneficiary of a trust. A taxpayer who is an object of a discretionary trust is considered to be a beneficiary.
• A taxpayer who (either alone or with others) entered into or carried out a scheme for the sole or dominant purpose of obtaining a scheme benefit.
• A taxpayer the ATO deems to be in a high risk category or special case as prescribed by regulation.