With the start of winter and the cold and wet weather well and truly here (for some states), it is time to start thinking about tax and super. What do you need to do before the 30th of June and what can you take advantage of in the new financial year. The ATO are also back in force and as usual have some key areas they will focus on this year. Please contact our office if you would like to discuss any of the following in more detail…
END OF FINANCIAL YEAR “SUPER” CHECKLIST
Contributions
- Consider topping up your concessional (before-tax) contributions (new annual cap of $27,500) but ensure you complete the required documentation to validate your claim. You may also be eligible to take advantage of the “unused concessional cap carry forward” option if your Total Superannuation Balance is less than $500,000.
- Consider making additional non-concessional (after-tax) contributions, subject to limits. If eligible, an additional after-tax contribution may qualify you for a Government Co-Contribution of up to $500. The co-contribution phases out at incomes over $56,112.
- Consider making a contribution on behalf of your non-working or low income spouse. A minimum contribution of $3,000 may entitle you to a maximum tax offset of $540 provided the spouse’s income is less than $37,000 and completely phases out when a spouse’s income reaches $40,000.
Super Pension Payments
The 50% reduction in the minimum drawdown requirement is still in place for the 2021-22 financial year for certain pensions (including Account Based Pensions and Market Linked Pensions). Ensure all minimum pension payments have been withdrawn from your SMSF or other pension super fund by 30th June 2022, otherwise tax concessions may not be available.
| AGE | CURRENT MINIMUM % | NEW REDUCED MINIMUM % FOR 2021-22 |
| UNDER 65 | 4 | 2 |
| 65-74 | 5 | 2.5 |
| 75-79 | 6 | 3 |
| 80-84 | 7 | 3.5 |
| 85-89 | 9 | 4.5 |
| 90-94 | 11 | 5.5 |
| 95 AND OVER | 14 | 7 |
EXTENSION OF MINIMUM DRAWDOWN
The 50% reduction in the minimum pension drawdown limit will be retained for the 2022-23 financial year
BEWARE: Some super funds and super clearing houses have a cut-off date for accepting contributions to be counted towards the 2022 financial year, so check with your individual fund and/or your payroll department for their specific requirements.
If you wish to check your eligibility for any of the above contribution strategies or check your minimum SMSF pension requirement, please contact our office.
END OF FINANCIAL YEAR “TAX” TIPS
Claiming Working from Home
The ATO will take a stronger compliance approach for working from home deductions such as work related clothing and laundry expenses which would be expected to decrease if working at home. Deductions for home rent, rates and mortgage interest are not deductible unless a genuine business is being run from home. Continuing on for the 2022 income year, the shortcut method of 80 cents per hour worked can be used to calculate working from home deductions. This includes all expenses such as telephone, internet, electricity, computer consumables and depreciation of furniture and equipment. A time sheet or diary should be kept as a record of the number of hours worked.
Covid Related Expenses
The cost of Covid PCR and Rapid Antigen Tests can be claimed if they are required by your employer to come into your workplace. Time spent travelling for a test cannot be claimed. Masks and other protective equipment can only be claimed if mandatory for your employment i.e. healthcare or retail. You need to keep receipts for all purchases.
Vehicle Logbook
Logbooks are used to record the business use of a motor vehicle and are used as evidence to claim expenses as a tax deduction. The logbook must be kept for 12 continuous weeks during the income year and are valid for 5 years unless there has been a significant change in your work travel circumstances. The logbook must contain the date, odometer reading, kilometres travelled, purpose of trip, business use percentage and details of the vehicle such as make, model and registration.
Temporary Full Expensing of Capital Assets
Business depreciating assets acquired after 6 October 2020 and before 30 June 2023 can be fully deductible in the year in which the asset is first held, used or installed. The cost of improvements to a depreciating asset can also be fully claimed in the year the improvement is made. So if you have been planning on buying a new asset for your business, you may wish to consider making use of this deduction in the 2022 income year.
Timing of Capital Gains Tax Asset Sales
Keep in mind that for CGT purposes a capital gain generally arises when a contract is signed and not when the sale proceeds are received. Bringing forward or deferring a sale to a different income year may have significant tax implications.
Investment Property Expenses
Depending on your personal situation, it may be helpful to bring forward certain rental property expenses such as repairs and maintenance, or speak to your lender about the possibility of prepaying loan interest up to 12 months ahead.
ATO RED FLAGS FOR 2022
AREAS OF CONCERN:
- Lodging early before employers, banks and other investment companies have finalised reporting to the ATO or changing the data reported.
- Not declaring Cryptocurrency capital gains.
- Rental property deductions, such as:
- Private use / holiday houses
- Purpose of any new borrowings
- Repairs vs capital improvements
- Inclusion of any capital expenditure in body corporate fees
- Work related expenses, such as:
- High deductions claimed compared to others in similar industries
- No link between the expense claimed and the type of employment
- No evidence of the expense such as receipts, logbook or diary entries
- Incorrect apportionment between private use vs work use
- Exact copying of deductions from the prior year
- Claiming expenses that have been reimbursed by your employer
- Overclaiming Work From Home deductions when not working at home
HOT TIP!!
Due to Single Touch Payroll, you may not receive a PAYG Payment Summary from your employer. A Registered Tax Agent can access it for you once it is finalised, or you can access it through your MyGov account if you have one.
The ATO and the Tax Practitioners Board recommend that taxpayers utilise the services of a Registered Tax Agent who can help you with your tax obligations, have access to deferred lodgement due dates and can liaise with the ATO on your behalf. Never use an agent who is not registered and always look for the tax practitioner symbol.
TAX RATES & OFFSETS FOR 2022
| Individual Tax Rates for 2021/22 and 2022/23 | |
| Taxable Income | Tax on Income (plus Medicare Levy) |
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 19c for each $1 over $18,200 |
| $45,001 – $120,000 | $5,092 plus 32.5c for each $1 over $45,000 |
| $120,001 – $180,000 | $29,467 plus 37c for each $1 over $120,000 |
| $180,001 and above | $51,667 plus 45c for each $1 over $180,000 |
- The company tax base rate has reduced to 25%
- The Low Income Tax Offset remains at $700 for incomes up to $37,500 and cuts out fully at $66,668
- The Low and Middle Income Tax Offset starts at $675 and increases to a maximum of $1,500 for incomes between $48,001 and $90,000 and cuts out fully at $126,001
CHANGES AND THRESHOLDS FROM 1 JULY 2022
- Super Guarantee Contribution increasing from 10 to 10.5%
- Concessional Contribution Cap staying at $27,500 p.a.
- Non-Concessional Contribution Cap staying at $110,000 p.a.
- Transfer Balance Cap for new retirement phase pensions staying at $1.7m
- Removal of the $450 per month threshold to qualify for super guarantee contributions
- Downsizer Contributions available from the age of 60 (previously 65)
KEY DATES
| 8 JUNE | Extended due date for SMSF and company tax returns where non-taxable in the prior and current year
Extended due date for individual and trust tax returns with a due date of 15th May 2022 provided any liability is also made by this date |
| 30 JUNE | Last day to deposit contributions into your super fund for allocation and deductibility in 2022
Last day to withdraw your pension from your super fund and have it count towards your minimum requirement in 2022 Last day to lodge you and your partner’s 2021 individual tax returns if you are receipt of Child Care Subsidy and Family Tax Benefit payments from Services Australia |
| 1 JULY | Increase to Super Guarantee Contribution rate from 10% to 10.5% and minimum monthly income threshold of $450 removed |
| 14 JULY | Last day for businesses to finalise 2022 STP reporting for all employees |
| 28 JULY | Due date for Super Guarantee Contributions for the quarter ended 30 June 2022 |
Disclaimer section:
The information provided does not constitute financial or taxation advice and does not take into account your personal objectives, needs and circumstances. We recommend that you obtain personal advice from an appropriately qualified advisor or tax agent before acting on any of the information provided in this newsletter. Liability is limited by a scheme approved under the Professional Standards Legislation.