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.