Earlier in the year, the Commissioner released the Standard Practice Statement SPS 18/02 “Requests to Change a Balance Date”. The statement outlines the situations where the Commissioner will grant approval for a taxpayer to change their balance date.
The statement also sets out the circumstances where the Commissioner will allow a retrospective election to change a balance date. This is significant because historically, the Commissioner’s practice was to defer the effective date for a change in balance date until the following income year. This meant that effectively the Commissioner did not previously allow a retrospective change of balance date.
The circumstances in which the Commissioner will allow a retrospective change in balance date are the following:
- When a taxpayer can show that it is possible for them to file returns for all income years; and
- The late election was not made for reasons of tax avoidance or to take undue advantage of a tax incentive; and
- Any tax deferral as a result of the proposed balance date change is insignificant.
While this statement may provide some options where Balance dates are not aligned we would not rely on this and would recommend making this application before the start of the relevant income year.