Year-End Tax Planning

With 30 June 2022 fast approaching, it’s time to consider whether any tax planning action is required prior to year-end.

We will be contacting you soon if we identify beneficial tax planning strategies relevant to your circumstances. If you have specific concerns about your tax position for the 2022 tax year, or are aware of a particular income event that you haven’t told us about such as the sale of a property, please contact your Client Manager.


Business

Instant Asset Write-Off

The temporary full expensing of business asset purchases remains in place until 30 June 2023. It allows for an immediate deduction for eligible business assets.

If you are intending to purchase an asset before 30 June 2022, please note that the asset must be installed and ready for use in the business prior to this date for the deduction to be available in the 2021/2022 tax year.

Small Business Company Tax Rate

For the current (2021/22) tax year, the company tax rate for businesses with an annual turnover of less than $50M is 25%.

Tax Treatment of COVID Grants

Some Covid related grants are classified as non-assessable non-exempt (NANE) income and are not directly taxed.

For QLD businesses the only Covid grant currently listed as NANE is the 2021 COVID-19 Business Support Grants. The tax status for all states can be viewed here: https://www.ato.gov.au/General/COVID-19/Government-grants,-payments-and-stimulus-during-COVID-19/Tax-implications/Eligible-COVID-19-business-grants-and-support-programs/

Super Guarantee Changes

The superannuation guarantee percentage will increase from 10 percent to 10.5 percent from 1 July 2022. Further increases of 0.5% are scheduled to take place each year until 2025 at which point the superannuation guarantee will reach 12 percent.

Please ensure that your payroll software is setup to reflect the change to 10.5 percent on 1 July 2022.

A further superannuation guarantee change that applies from 1 July 2022, is that employers will be required to make super guarantee contributions to their eligible employee’s super fund regardless of how much the employee is paid. Previously a $450 per month threshold applied so that employees earning under this threshold did not qualify for superannuation guarantee payments. This threshold is abolished from 1 July 2022.

Company Loss Carry Back Tax Offset

For the year ending 30 June 2022 loss making companies are eligible to carry back a tax loss it incurs in the 2019–20, 2020–21 or 2021–22 income years and offset it against the income tax liability of earlier income years as far back as the 2018–19 income year to generate a refundable tax offset.  The offset is temporary and will cease to apply following the 2022-23 year. The refundable offset is limited to tax paid in the eligible prior years and cannot result in a negative franking account balance.

 Small Business Technology Investment Boost

Small businesses with less than $50 million annual turnover, will be able to deduct $1.20 for every $1 spent on business expenses and depreciating assets that support their digital adoption (such as portable payment devices, cyber security systems and subscriptions to cloud-based services). The boost applies to expenditure from 7.30pm 29 March 2022 until 30 June 2023 but will only be able to be claimed in the 2023 income tax return. An annual cap of $100,000 of expenditure applies, so those who expect to maximise their claim will benefit from spreading their expenditure between the 2022 & 2023 financial years. Note that this will not result in tax savings until the 2023 tax return is prepared.

Please note that this measure is not yet law and is subject to decisions from the new Government.

Small Business Skills & Training Boost

Small businesses with less than $50 million annual turnover, will be able to deduct $1.20 for every $1 spent on external training courses for employees provided in Australia or online by registered training organisations. The boost applies to expenditure from 7.30 pm 29 March 2022 until 30 June 2024 but will only be able to be claimed in the 2023 and 2024 income tax returns. There is no cap on the amount of boost which can be claimed. Note that this will not result in tax savings until the 2023 tax return is prepared.

Please note that this measure is not yet law and is subject to decisions from the new Government.


Superannuation

Minimum Pension Draw Down Extended

The government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year to 30 June 2023.

The government reduced the minimum superannuation drawdown rates by 50% for the 2019–20, 2020–21 and 2020-22 income years due to Covid.

The current minimum pension rates are:

Superannuation Contributions Caps for the year ending 30 June 2022

The concessional contribution cap is $27,500 p.a.

The non-concessional cap in 2021–22 is $110,000 p.a. Correspondingly the maximum amount a member can contribute under the non-concessional three year bring-forward rule is $330,000.

Prior to making any superannuation contributions, please check other eligibility requirements such as age limits and total superannuation balance caps.

Carry Forward Concessional Contributions

The carry-forward arrangements involve accessing unused concessional (tax deductible) cap amounts from previous years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.

To use your unused cap amounts in the current year, your total super balance as at 30 June of the previous financial year must have been less than $500,000.

The amount of unused cap amounts you will be able to carry-forward will depend on the amount you have contributed in previous years, starting from 2018–19. You can use caps from up to five previous financial years. The ATO portal contains information on unused contribution caps from prior years. Your Client Manager can access the figures if you are interested in making catch up concessional contributions.

Repealing the work test for voluntary superannuation contributions

From 1 July 2022, individuals who are aged between 67 to 74 years old will be able to make or receive personal contributions and salary sacrificed contributions without meeting the work test, subject to the existing contribution caps. They will still be required to meet the work test to claim a deduction for personal contributions.

For individuals aged 67 to 74 who have a superannuation balance under the transfer balance cap (typically $1.6 to $1.7M) this may present an opportunity to boost your superannuation balance. Contribution caps still apply so it best to check with your Client Manager prior to making any contributions.

Government Co-Contribution

If you earn less than $56,112 p.a. and at least 10% of your income comes from employment or running a business, you could be eligible for the government co-contribution. The government will contribute 50 cents for every dollar of after-tax contributions you make to your superannuation fund up to a maximum of $500. The full benefit is available for income earners under $41,112 and phases out where adjusted taxable income is between $41,112—$56,112. Other superannuation balance thresholds and aged based restrictions apply so please contact your Client Manager if considering making a co-contribution.


Individual Tax

Personal Tax Rates
The tax rates for the 2021/2022 are:

The above rates to do not include the 2% Medicare levy. The Medicare levy applies to all taxpayers except for low income earners.

Tax Planning – 7 Quick Tips

You have almost certainly seen this list before. All we can say is that they are oldies but goodies. Please contact your Client Manager if you have any questions about how best to implement these strategies.

1. Pay June Quarter Employee Super Before 30 June – Superannuation is only tax deductible when received by the super fund. This means that super accrued in the June Quarter will not be tax deductible until next year if it is paid when it is due on 28 July. Get the tax deduction in 2021/22 by paying your employee super at least two weeks before the end of June, to allow for clearing house processing timeframes.

2. Super contributions – Individuals can claim a tax deduction for contributions they make towards their superannuation. This is one of the only tax deductions where you can claim a deduction but not actually erode your overall asset position. As above, superannuation is only tax deductible when received by the super fund so please plan to make any contributions as early as possible before 30 June.
There may be additional conditions that you must meet before making a contribution, so please consult with your Client Manager before proceeding.

3. Pre-pay Expenses – Consider pre-paying business expenditure. Small business entities with a turnover of less than $50M can pay up to twelve months of expenses in advance.  This strategy is particularly effective if your income is unusually high in the current tax year.

4. Review Debtors and Trading stock – Prior to 30 June, review your trade debtors list to see if any bad debts can be written off.

Perform a stock take on 30 June to ensure that worthless/obsolete stock isn’t included in your closing stock figures. Inflated closing stock effectively increases your taxable income.

5. Bring Forward Capital Expenditure – Businesses can consider bringing forward the purchase of capital assets (refer section above).

6. Ensure low tax thresholds are utilised – One of the most tax effective strategies involves ensuring that taxable income is shared amongst immediate family members to ensure that no individual is being pushed into the higher tax brackets unnecessarily. This can be achieved by targeted wages payments, trust distributions and/or dividend payments. Your Client Manager will review these options in the coming weeks, but if you would like to discuss how you could use this strategy, please give them a call.

7. Capital Gains – If you have derived any capital gains from the sale of your investments or business assets this year, consider whether you can offset them by crystallising any capital losses on the sale of other assets (where possible), or be able to use the CGT Small Business concessions. Please contact us to discuss prior to 30 June 2022 if you are considering applying this strategy.

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