Tax Time 2022 Update

Coming into the end of a financial year is always a reminder to take a look at what is recent and needs consideration for the current year and what is on the horizon for the next year. Here is a snapshot of what’s new in 2022 and what’s coming for 2023 for individuals, companies, superannuation and trusts:

Individuals

Home office short cut method of claiming 80 cents per hour ends on 30 June 2022. This was a temporary measure introduced in response to the Covid-19 lockdowns.

Companies and businesses

Company tax rate for base rate entities (i.e. companies that turnover less than $50m that trade) was reduced from 26% to 25% on 1 July 2021.

Super guarantee levy increases to 10.5% from 1 July 2022.

$450 super guarantee threshold on monthly wages is being removed from 1 July 2022, when 10.5% super will need to be paid on 100% of payments to employees and eligible contractors, not only when payments exceed $450 per month.

Due to the change to the $450 super guarantee threshold, if you are making super payments to people under 18 years old, you will only need to make super contributions if they work more than 30 hours a week for you.

Rapid antigen tests are tax deductible if required to attend a place of work and fringe benefits tax won’t apply.

Temporary full expensing of new and second hand assets purchased by businesses turning over less than $50m. The purchase of eligible business assets will be 100% tax deductible if it is installed and ready for use from 6 October 2020 prior to 30 June 2023. So this covers both the current and next financial years. Note that there is an exception to full expensing when a car for more than $60,733 is purchased and that FBT may apply.

Small business technology investment 120% deduction hasn’t become law for the 2022 financial year as yet. If it is passed by Parliament it will apply to all expenditure and investment to support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. An annual $100,000 cap will apply to each qualifying income year. This measure will apply to expenditure incurred in the period commencing from 7:30 pm AEDT 29 March 2022 until 30 June 2023. Any claim for the additional 20% deduction on this expenditure will be carried over and claimed in the tax return for the 2023 financial year. This will apply to business turning over less than $50m.

Small business skills training boost 120% deduction, again hasn’t become law for the 2022 financial year. Once passed by Parliament an additional 20% deduction will apply to all eligible training courses from 29 March 2022 until 30 June 2024. The eligible expenses for the 2022 financial year will be claimed in the 2023 tax return along with the eligible expenses for the 2023 year. This is available for all businesses turning over less than $50m.

Loss carry back provision apply again in 2022 and will finish on 30 June 2023. The loss carry back provisions provide a rebate up to the amount of tax paid from 1 July 2018 to 30 June 2022 if a tax loss is incurred between 1 July 2019 to 30 June 2023.

Single touch payroll is now mandatory for all businesses with employees. This includes companies where there is a director taking periodic payments when there has been an adjustment done for wages, bonus or directors fees at the end of the financial year.

Superannuation

Superannuation is, as always, only deductible when it is paid to the clearing house and then received by the super fund by the due date. To ensure a tax deduction for your June contributions in your 2022 tax return, pay contributions prior to 30 June. Contributions paid between 1 July and 28 July will need to wait until next year.

Furthermore, contributions must be made to a complying super fund to receive a deduction. This is generally only an issue if you have a self-managed super fund and there are outstanding tax returns or other compliance issues.

Concessional contributions limit increased from $25,000 to $27,500 from 1 July 2021.

Non-concessional contributions limit increased from $300,000 to $330,000 from 1 July 2021.

Minimum pension payments remain at 50% for the 2022 and 2023 financial years.

Transfer Balance Cap limit has increased from $1.6 million to $1.7 million on transfer of your super balance from accumulation phase to retirement phase.

Work test has been removed for people aged 67 to 74 years old, from 1 July 2022, when making personal non-concessional super contributions and salary sacrificed contributions. They can also use the bring forward concessional contributions rule.

Downsizing contributions can be made by people who are 60 years old or older from 1 July 2022, when selling their home and moving to another. Previously, only people who were 65 years old or older could make these contributions. The maximum contribution is $300,000 and all other conditions remain the same.

Trusts

Distributions to adult children have come to the attention of the ATO. They have issued a draft ruling and Practice Guidance Note essentially prohibiting the distribution of income from a trust to adult children under an arrangement where the distribution is then gifted back to the parents after any tax is paid or remains in the trust as an unpaid entitlement. Moving forward all distributions paid to adult children will need to be paid into a bank account where they have full access and control to comply with the rules. Any payments of cash or benefits back to parents that are ‘extravagant’ (e.g. car) will also not comply with the new rules.

This is a broad overview only and we strongly recommend that you get advice in relation to any specific issues that you think may apply to you. Important details have been left out in our attempt to keep the matters raised from becoming overly complex.

If you would like to know how to make the most of your 2022 tax position please book a time here:

Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.