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Think twice when determining your clients period of review with the ATO



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New exclusions from the 2-year period of review

Prior to Christmas, the Government released amending regulations to the ITAA (1936 Act) Regulation 2015 to exclude certain small-medium sized entities (SME’s) (turnover less than $50 million) from the 2-year period of review in respect of income tax assessments. Such entities will instead have a 4-year amendment period, and include the following:

    • Entities that have transactions with related parties: who were not dealing with each other at arm’s length; or, which resulted in $200,000 or more being included as assessable income or a tax deduction of any of the parties; or involving CGT events of which capital proceeds are $200,000 or more.

    • Entities with at least 10 other entities “connected with” or “affiliates of” the entity, at any time during the assessment year.

    • Entities that have claimed CGT relief under: Division 615 (restructure), Division 125 (demerger), Subdivision 126-B rollovers, Division 855 (disregard of capital gain/loss).

The amending regulations with respect the 4-year period of review, also extend to entities making a claim under Division 355 (research and development); foreign entities, and certain entities earning foreign sourced income.

The updated regulations apply to assessments after 9 December 2022 that relate to income years starting on or after 1 July 2021.

It is important to review the amendment period provisions before making any assumptions regarding the amendment period applicable to an entity, which could be for a period of 2 years, 4 years, or unlimited.

An Important Message: While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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