As an instructor I am hard over on this one. Unless you fly virtually every day and practice this manoever often, a situation that I would argue will never apply, to virtually everyone reading this forum, Then I think one should never attempt a turn back below 1000 feet AGL.
What should be is that every pilot is good enough to a immediately assess the the nature of the emergency, because remember you may only have a partial engine failure (see Gengis post for what a can of worms that can be), then immediately execute a steep low altitude turn at just above stall speed.
What IS however is an accident record where many turnbacks end in fatal crashes. Survivable crashes are ones where you hit the ground wings level in a level flight or nose up attitude. The killer crashes are low altitude stall spins or hitting the ground in a very nose low attitude, precisely what will happen if you screw up the turn back.
I think it is also important to point out that the most important action after an EFATO is to immediately lower the nose to the glide attitude.
An EFATO with the aircraft nose at the Vy attitude will loose airspeed very quickly unless the nose is lowered as soon as the engine fails. I personally know of a fatal accident where the aircraft stalled right after the EFATO because the pilot froze and did not lower the nose in time.
So I teach Vy climb to 1000 AGL as altitude is your friend so you want to get to an altitude where you have options as quickly as possible, and in the event of an engine failure below 1000, it is nose down to the glide and only turning enough to avoid major obstacles.
I also insist that before every takeoff the student reviews the actions for an engine failure during the takeoff and after takeoff including touching the relevant controls. The EFATO portion starts with him/her physically moving the control wheel firmly forward. After doing this brief 30 or 40 times the actions become automatic and that I think is what will save your bacon if you are unfortunate enough to have an EFATO, not some hero pilot split arse low level steep turn.....
Finally one area where the flight school IMO do not place enough emphasis is for an engine failure on the takeoff roll is to immediately fully close the throttle. Again I have personal knowledge of an accident where an airplane was destroyed and the occupants injured because the pilot failed to accomplish this simple action when the engine died on the takeoff roll.