Edited version of private advice

Authorisation Number: 1051651404480

Date of advice: 1 April 2020

Ruling

Subject: Requirement to lodge

Question

Are your required to lodge income tax returns for the years ending 30 June 20XX to 30 June 20XX under section 161 of the Income tax Assessment Act 1936?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You have stated that you would find it extremely difficult to retrieve or recreate the income tax records for the period of 30 June 20XX to 30 June 20XX

You declared bankruptcy in 20XX

You have worked with your tax agent to lodge all the returns from 30 June 20XX through to 30 June 20XX

Relevant legislative provisions

Income Tax Assessment Act 1936 section 161

Reasons for decision

Section 161 of the Income Tax Assessment Act 1936 (ITAA 1936) states that every person must, if required by the Commissioner by notice published in the Gazette, give to the Commissioner a return for a year of income within the period specified in the notice.

These instruments outline the entities that are required to lodge a return of income for the specified period. Table A of the legislative instruments state which individual taxpayers are required to lodge an income tax return. Paragraph 4 of Table A identifies that resident taxpayers that carried on a business are required to lodge an income tax return. You have stated you had a business in the years ending 30 June 20XX to 30 June 20XX.

The Commissioner has issued the following legislative instruments in respect of the 20XX through to the 20XX income years:

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2015/1)

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2016/1)

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2017/1)

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2015/1)

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2016/1)

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2017/1)

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2015/1)

·         Lodgement of returns for the year of income ended 30 June 20XX in accordance with the Income Tax Assessment Act 1936, the Income Tax Assessment Act 1997, the Taxation Administration Act 1953, the Superannuation Industry (Supervision) Act 1993 and the Income Tax (Transitional Provisions) Act 1997 (TPAL 2016/1)

These instruments outline the entities that are required to lodge a return of income for the specified period. Table A of the legislative instruments state which individual resident taxpayers are required to lodge an income tax return. Paragraph 4 of Table A identifies that resident taxpayers that carried on a business are required to lodge an income tax return. You have stated you had a business in the years ending 30 June 20XX to 30 June 20XX.

TABLE A

Every person not covered by Tables N or • who during the year of income:

Paragraph 4 of Table A identifies that resident taxpayers that carried on a business are required to lodge an income tax return. You have stated you had a business in the years ending 30 June 20XX to 30 June 20XX.

Record-keeping requirements

Although most records, statements, elections and notices no longer have to be lodged with returns, all taxpayers should retain relevant records, elections, etc, to enable the information reported in a return to be verified at a later date, for example if a taxpayer is selected for audit.

Record-keeping requirements are principally contained in s 262A (general requirements), ITAA 1997 Div 900 (substantiation of car, travel and employment-related expenses), ITAA 1997 s 121-30 and 121-35 (CGT) and FBTAA s 132 (FBT).

The ATO states, for example, in the instruction booklets for Forms C and F that «records» which need to be retained include:

(1) balance sheet

(2) detailed profit and loss statement (includes profit and loss appropriation account and, where appropriate, manufacturing and/or trading accounts)

(3) livestock and produce accounts for primary producers (inapplicable for funds, etc)

(4) notices and elections

(5) documents containing particulars of any estimate, determination, or calculation made for the purpose of preparing the return, together with details of the basis and method used in arriving at the figures in the return (eg worksheets that show details and amounts used to arrive at the figures recorded in the return), and

(6) a statement describing and listing the accounting systems and «records» (eg chart of accounts) that are kept manually and electronically.

Lost or destroyed records

Section 900-205 of the Income Tax Assessment Act1997 -'What if your documents are lost or destroyed?' outlines as follows what can and should be done if records are lost or destroyed:

(1) If you have a complete copy of a document that is lost or destroyed during the * retention period, it is treated as the original from the time of the loss or destruction.

(2) If you don't have such a copy, but the Commissioner is satisfied that you took reasonable precautions to prevent the loss or destruction, the rest of this section explains what to do.

(3) If the lost or destroyed document was a travel record, log book or other document that is not written evidence of an expense under Subdivision 900-E, you do not need to replace it; your deduction is not affected by your failing to retain or produce the document.

(4) If the lost or destroyed document was written evidence, you must try to get a substitute document that meets all the original requirements (except the time limit for getting the original).

(5) If you succeed, your deduction is not affected by your failing to retain or produce the original document. The substitute document is treated as the original from the time of the loss or destruction.

(6) If it is not reasonably possible to succeed, your deduction is not affected by your failing to retain or produce the original document.

(7) If it is reasonably possible for you to get a substitute document, but you don't get one, this section does not protect you from the consequences of failing to retain or produce the original.

There are a number of measures you can take in reconstructing your records including the following:

There are a number of measures you can take in reconstructing your records including the following:

·         Request copies of documents we hold such as:

-  income tax returns

-  income statements and payment summaries

-  activity statements

-  notices of assessment

·         Documents you can access via ATO Online Services:

-  lodged income tax returns from 2010 onward

-  notice of assessments from 2010 onward

-  income statements, if your employer reports through Single Touch Payroll (STP)

-  lodged activity statements (sole traders only).

·         Documents held by others

-  Your employer or payer should have copies of your payment summaries. Your bank should be able to provide you with bank records.

-  If your employer reports your income and super information through STP, you can access a copy of your income statement through ATO online services via myGov.

-  Your registered agent may also have copies of your records.

-  Your bank may charge you a fee for replacing bank records and providing any other information or service to help you to reconstruct records. You can claim a deduction in the income year that those fees are charged.

In addition Practice Statement Law Administration 2011/25 - 'Reconstructing records and making reasonable estimates for taxpayers affected by a disaster', outlines a number of methods of reconstructing records.

You may be able to lodge an income tax return based on a signed statement setting out a 'reasonable estimate' of their taxable income in a 'Reasonable estimate for documents destroyed by disasters' form which is available on ato.gov.au. In addition to document/copies obtained, the prior three year income tax returns and BAS statements could be utilised to make reasonable a trend-based estimate of the current income year's income.

Where possible the above recommendations should be undertaken as part of your requirement under section 161 of the Income Tax Assessment Act 1936 to lodge a return for the outstanding years 20XX through to 20XX.