Individuals and Business
Tax Time 2022
Wilson Colman is full steam ahead, setting up for the fast-approaching 2022 Tax Season.
After 16 years with us and almost 10 years as a partner, John Day will be retiring as a partner on 30 June 2022. You will still get to say goodbye during the next 6 months as John will be at the office as a Consultant until Christmas. John is looking forward to all his retirement chats and senior jokes when he sees you next.
We hope that you have been able to remain healthy during this pandemic. So we can all continue to be safe, we appreciate everyone adhering to social distancing guidelines when attending our office and remembering that if you are unwell, please reschedule your appointment and stay home.
The ATO will start full processing of 2021-2022 tax returns on 7 July 2022 and expect to start paying refunds from 16 July 2022. The ATO aims to finalise the majority of electronically lodged current year tax returns within 12 business days of receipt.
We look forward to being of service to you this year and if you have any questions, please call us.
See you soon…Vic, Andrew & John
BANK ACCOUNT – You must confirm your bank details with us each year. Please bring them to your interview and we will check what we have on file and update them if required. Please also check the final return that is emailed to you and verify the details.
FEE FROM REFUND – If you require our fee to be deducted from your refund, please let us know before the return is lodged.
LODGEMENT AND PAYMENT – Please note that our fee for individual tax returns is due and payable at the time of the consultation and tax returns are only lodged if your account has been paid.
We have several options to help you get your tax return prepared. They are:
- Email all required documentation to our office
- Attend our office at a pre-booked appointment
- Drop off at reception
- Post into the office
Saturday and evening appointments are extremely popular and fill quickly during the tax season, so to avoid disappointment please book early. Saturday appointments start at 8 a.m. through to noon. Please don’t be late. If you cannot make it on time, please call us so that we can cancel your appointment and arrange another time.
Tax Season is during July, August, and September
- Monday to Wednesday 7:30 a.m. to 6:00 p.m.
- Thursday 7:30 a.m. to 4:00 p.m.
- Friday 7:30 a.m. to 3:00 p.m.
- Saturday appointments are available from July 16 to September 3 inclusive with Vic, Andrew, John & Paul from 8:00 a.m. to 12:00 p.m.
- Monday to Thursday 9:00 a.m. to 5:00 p.m.
- Friday 9:00 a.m. to 4:00 p.m.
Your Income Tax Return
The types of income you need to declare are listed below. Each item is linked to specific details with the ATO:
- Employment income
- Super pensions and annuities
- Government payments and allowances
- Investment income– including interest, dividends, rent, and capital gains
- Business, partnership, and trust income
- Foreign and worldwide income
- Other income– including compensation and insurance payments, discounted shares under employee share schemes, and prizes and awards.
You also need to declare any money or earnings you receive from:
- Air BNB, Apartment/House sharing
- Uber and other ridesharing apps and services.
Wait for your employer to mark your income statement as ‘tax ready’ before you prepare and lodge your tax return. Your employer should mark your income statement as ‘tax ready’ by 14 July. If you have more than one employer, you may receive several income statements or both a payment summary and an income statement. You will need to check that income from all your payment summaries is included in your tax return.
Basic Rules to Claim a Tax Deduction
You must have incurred the expense in 2021-2022. To claim a deduction for a work-related expense:
- you must have spent the money yourself and were not reimbursed.
- the expense must be related to earning your income.
- you must have a record to prove the expense. (Format for Records)
The expense must not be private, domestic, or capital in nature. For example, the costs of normal travel to and from work, and buying lunch each day are private expenses.
If you incurred an expense that was both work-related and private or domestic, you can claim a deduction only for the work-related part of the expense.
If you incurred an expense that was capital in nature, you may be able to claim a deduction for the decline in value of the depreciating assets you bought.
If you incurred an expense for services paid in advance, you will need to decide what part of the expense is deductible in 2021-2022.
You cannot claim a deduction for an expense to the extent that:
- someone else paid the expense, or you were or will be, reimbursed for the expense, or
- the payment or reimbursement is a fringe benefit (including an exempt benefit).
If you were partially reimbursed for the expense, you can only claim the part that was not reimbursed.
Working from Home Shortcuts
The ATO’s optional 80c per hour method for claiming home office running costs in light of Covid-19 has been extended to 30 June 2022. This arrangement allows people to claim an all-in rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses. If you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home. There are three ways that you can choose to calculate your home office expenses:
- claim a rate of 80 cents per work hour
- claim a rate of 52 cents per work hour for heating, cooling, lighting cleaning and the decline in value of office furniture, plus calculate the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device
- claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis
Car Expenses Simplified
Two methods are available to claim car expenses:
- Cents per Kilometre
The logbook method is based on the business use percentage of the running costs. The logbook must be kept for 12 consecutive weeks every 5 years unless your pattern of usage changes.
The cents per kilometre method is capped at 5000km and is based on 72 cents per kilometre for 2021-2022.
Work-related Home/Mobile/Phone and Internet Usage
To Bundle or Not to Bundle…
About non-bundled internet and phone expenses – taxpayers must keep invoices or receipts to evidence that the expenditure has been incurred. The ATO advises that a reasonable basis for identifying the portion of work-related expenses includes:
- Adding all the actual work-related calls from your itemised telephone account and/or
- Use a diary to figure out the work-related part of your phone and internet use over four weeks.
Bundled expenses – again the taxpayer must keep a four-week diary to identify the work-related portion of use. However, the internet and phone part need to be shown either by a breakdown of relevant costs by the supplier or a percentage of relative costs if they were separately purchased from a supplier.
Clothing and Laundry
A tax deduction is available for the cost of buying and cleaning certain occupation-specific clothing, protective clothing, and some unique or distinctive clothing. You cannot claim for conventional clothing including drill shirts.
This expense category will be an area of focus for the ATO for 2022.
Zone Tax Offset – FIFO (Fly-in-Fly-Out)
The Zone Tax Offset is now limited to people who are genuinely living in a designated geographical zone. It will exclude “fly-in-fly-out” (FIFO) and “drive-in-drive-out” workers from the Zone Tax Offset where their usual place of residence is not within a “zone”.
Personal Income Tax Rates
|2022 Tax Rates for Residential Individuals|
|Taxable income||Tax on this income|
|$0 – $18,200||Nil|
|$18,201 – $45,000||19 cents for each $1 over $18,200|
|$45,001 – $120,000||$5,092 plus 32.5 cents for each $1 over $45,000|
|$120,001 – $180,000||$29,467 plus 37 cents for each $1 over $120,000|
|$180,000 and over||$51,667 plus 45 cents for each $1 over $180,000|
Low and Middle Income Tax Offset (LMITO) Increased for 2022
The existing LMITO will be increased by a ‘once-off’ $420 amount for the 2022 income year.
What are the increased LMITO amounts for the 2022 income year?
|Taxable Income||2022 LMITO (existing)||Plus additional amount|
|$0 – $37,000||$255||$420|
|$37,001 – $48,000||$255 + 7.5% of excess over $37,000||$420|
|$48,001 – $90,000||$1,080||$420|
|$90,001 – $125,999||$1,080 – 3% of excess over $90,000||$420|
The additional $420 LMITO amount will have the effect of increasing the maximum LMITO entitlement to $1,500 for individuals.
LMITO is available for the 2022 income year in addition to the Low Income Tax Offset (LITO)
An individual who is entitled to the LMITO for the 2022 income year (including the increased $420 amount) may also be entitled to the LITO for the income year. The LITO is also a non-refundable tax offset and is available up to a maximum tax offset amount of $700.
The following table outlines both the LITO entitlement and the LMITO entitlement for the 2022 income year, based on an eligible individual’s taxable income.
|LITO (2022)||LMITO (2022)|
|$37,501 – $45,000||$700 – 5% of excess
|$37,001 – $48,000||$675 + 7.5% of excess
|$45,001 – $66,667||$325 – 1.5% of
excess over $45,000
$48,001 – $90,000
|$66,668+||Nil||$90,001 – $125,999||$1,500- 3% of excess
An adult taxpayer who is entitled to the maximum LITO of $700 and the minimum LMITO of $675 (i.e., $255 + $420) for the 2022 income year, will have an effective tax-free threshold (ignoring any other tax offsets) of $25,436.
ATO Audit Hot Spots
We are expecting far greater audit activity with the ATO paying special attention to the following claims:
- High work-related claims
- Motor vehicle expenses
- Claims for expenses that have already been reimbursed by an employer
- Rental properties – with a focus on claiming repairs to newly acquired properties, interest claims, holiday homes
- Air BNB operators or hosts
- Capital Gains Tax issues with applying for the main residence exemption
- Uniform and laundry claims
- Capital gains from crypto assets, shares & property
Super Contribution Limits Increase
The maximum concessional (tax-deductible) contribution for 2020-2021 was $25,000 and this increased to $27,500 from 1 July 2021.
The maximum non-concessional (after-tax, no tax deduction) contributions are:
|Under 67||$100,000 (or $300,000 over 3 years)||$110,000 (or $330,000 over 3 years)|
|67 – 74||$100,000||$110,000|
The above contribution caps are subject to the following:
- those aged 67 and over must generally satisfy the work test (employment for at least 40 hours in 30 consecutive days in a financial year)
- those aged 75 and over normally can’t contribute to superannuation
- any concessional contributions over the limits will attract tax at the individual members’ marginal rate of tax, plus an interest charge
- concessional contributions include Superannuation Guarantee Contributions and Salary Sacrifice Contributions
From 1 July 2021, if your total superannuation balance is greater than or equal to $1.7 million, you will no longer be eligible to make non-concessional contributions.
The 3-year bring-forward rules are now far more complex due to total super balance restrictions and transitional provisions – advice should be sought on eligibility before making these contributions.
Super Deductions for Personal Contributions
You may be able to claim for personal super contributions that you made to a complying taxed super fund from your after-tax income. The personal super contributions you claim as a deduction will count towards your concessional contributions cap.
If you are 67 to 74 years old, you still need to meet the work test or work test exemption criteria to be eligible to contribute and claim a tax deduction.
If you are 75 years old or older, you can only claim a deduction for contributions you made before the 28th day of the month following the month in which you turned 75 years old.
Before you can claim a deduction for your personal super contributions, you must have given your super fund a Notice of Intent to Claim. Your fund will then send you an Acknowledgement letter. We must have a copy of the Acknowledgement letter before we can lodge your tax return.
Please click on the link below or ask us to send you a form.
Carry Forward Contributions
Carry forward contributions are not a new type of contribution; they are simply new rules that allow people to use any of their unused concessional contributions cap on a rolling basis for five years.
This means if you don’t use the full amount of your concessional contribution cap in a year starting from 2018-19, you can carry forward the unused amount and take advantage of it up to five years later provided your total super balance at the start of the year is below $500,000.
Early Access to Superannuation during Covid19
Many people during the early COVID lockdowns took advantage of the early release of a super payment of $10,000. If you signed the declaration but didn’t meet the criteria, you may have to pay tax on the amount you received. Talk to us if you think you have made this error.
Super Fund Rates of Tax on Concessional Contributions
The rate of tax on concessional (tax-deductible) contributions is generally 15%. However, there is an additional tax of 15% paid by people whose combined income and concessional super contributions exceed $250,000. This is known as Division 293 tax and is levied on the excess over this $250,000 threshold, or on the super contributions, whichever is less. The additional 15% tax will be payable by the member, but the member can elect to withdraw funds from the superannuation fund to pay the added tax.
Superannuation Spouse Contribution Tax Offset 2022
This offset is available for contributions made on or before 30 June by a taxpayer to a Complying Superannuation Fund or Retirement Savings Account in respect of their low-income or non-earning spouse (married or de facto and under 67, or 67-74 and satisfy work test). Your spouse’s total superannuation balance on 30 June of the previous financial year must be below the general transfer balance cap ($1.6 million in 2020-2021 and $1.7 million in 2021-2022). The amount of the offset is:
|Spouses Assessable Income (including reportable fringe benefits and reportable employer superannuation contributions) (AI)||Maximum Rebatable Contributions (MRC)||Maximum Offset Amount (18% of the actual contributions if it results in a lower amount)|
|$0 – $37,000||$3,000||$540|
|$37,001 – $39,999||$3,000||The lesser of 1 or 2 up to maximum of $540
Actual contribution x 18%; or
(Contributions – excess AI over $37,000) x 18%
Government Co-Contribution 2022
The Government will contribute 50c for every $1 personally contributed into superannuation, up to a maximum of $1000, for which a tax deduction has not been claimed as follows:
- $500 up to the lower income threshold of $41,112
- $500 – [(income – $41,112) x 0.0333] between the lower and higher income thresholds
- $Nil over the higher income threshold of $56,112
Your total superannuation balance on 30 June of the previous financial year must be below the general transfer balance cap ($1.6 million in 2020-2021 and $1.7 million in 2021-2022).
As other conditions apply, please refer to the ATO publication “Super Co-Contribution” and the ATO “Super Co-Contributions Calculator”, which are both available from the ATO website.
A downsizer contribution of up to $300,000 into your super can be made from the proceeds of selling your Australian family home, provided that:
- You are 65 years or older at the time you make the contribution (proposed to reduce age to 60 from 1 July 2022)
- You (or your spouse) owned your home for at least 10 years
- You make the contributions within 90 days of selling your home: and
- You complete a downsizer contribution to super form
You can only make downsizing contributions for the sale of one home. If you sell your home and make a downsizer contribution, there is no requirement for you to buy another home.
Downsizer contributions are not classed as non-concessional contributions and therefore are not included in your non-concessional contributions cap. They are not tax-deductible and are included in deciding your eligibility for the aged pension.
Director ID in 3 simple steps
If you are a director of a company, you would have received an email from us letting you know that you must apply for a Director Identification Number (director ID). This video released by the ATO, ATO Video – DIN Application can help you apply online by following 3 simple steps. Australian Business Registry Services (ABRS) is reaching out to directors who haven’t applied for their director ID within prescribed timeframes. The application is free. We ask you to apply now if you have not already done so to avoid non-compliance.
|Date you first become a director||The date you must apply|
|On or before 31 October 2021||By 30 November 2022|
|Between 1 November 2021 and 4 April 2022||Within 28 days of the appointment|
|From 5 April 2022||Before appointment|
Single Touch Payroll
Single Touch Payroll (STP) is the way you report your employee’s tax and super information to the ATO.
From 1 January 2022, the information you report using STP has changed.
Expanding Single Touch Payroll (Phase 2)
What is Single Touch Payroll Phase 2?
In the 2019–20 Budget, the Government announced that Single Touch Payroll (STP) would be expanded to include additional information.
This expansion of STP (also known as STP Phase 2) will reduce the reporting burden for employers who need to report information about their employees to multiple government agencies. It also supports the administration of the social security system.
The mandatory start date for STP Phase 2 reporting was 1 January 2022.
There is nothing you need to do right now. The ATO is working closely with digital service providers who will update their STP-enabled software.
The ATO has published a factsheet that covers the key changes and more detailed information will be available soon.
It’s important to remember that all STP-enabled solutions have different functions and updates for the expansion will be offered in different ways. What you need to do to set up will depend on what product you use and how you manage your payroll.
The ATO will soon provide more information about what to do if you need additional time to transition to STP Phase 2.
What isn’t changing.
While you will need to report additional information in your STP report, many things that aren’t changing, such as:
- the way you lodge your STP report
- STP reports are still due on or before payday unless you are eligible for a reporting concession
- the types of payments that are in scope for STP reporting
- taxation and superannuation obligations
- end of year finalisation requirements
Increasing and Expanding Access to the Instant Asset Write-Off
Temporary Full Expensing Extension
In the 2020/21 Federal Budget, the Government announced amendments to allow businesses with an aggregated turnover of less than $5 billion to access a new temporary full expensing of eligible depreciating assets until 30 June 2022. Temporary full expensing became law when Treasury Laws Amendment (A Tax Plan for the COVID-19 Economic Recovery) Bill 2020 received Royal Assent on 14 October 2020.
In the 2021/22 Federal Budget, the Government has announced that temporary full expensing will be extended by 12 months to allow eligible businesses with aggregated annual turnover or the total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30 pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses.
Temporary Loss Carry-back Extension
In the prior year (2020/21) Federal Budget, the Government announced amendments to introduce a temporary loss carry-back measure. Broadly, this initial measure allowed ‘corporate tax entities’ with an aggregated turnover of less than $5 billion to carry-back tax losses made in 2020, 2021, and/or 2022 income years to claim a refund of tax paid (by way of a tax offset) in relation to 2019, 2020 and/or 2021 income years. The rules relating to the temporary loss carry-back regime have been enacted and are contained in Division 160 of the ITAA 1997.
In the 2021/22 Federal Budget, the Government has announced that the loss carry-back measure will be extended to allow eligible companies (i.e., with an aggregated turnover of less than $5 billion) to also carry back (utilise) tax losses from the 2023 income year to offset previously taxed profits as far back as the 2019 income year when they lodge their tax return for the 2023 income year.
Business Tax Rates and Concession
A 25% company tax rate for small businesses applies for 2021/2022 for those with an aggregated business turnover of less than $50 million.
The 13% small business income tax offset (up to $1000) is available to businesses with a turnover of less than $5 million. It applies only to business income for sole traders, or a share of business income from partnerships or trusts.
Taxable Payments Reporting System (‘TPRS’)
The TPRS is a transparency measure that requires businesses operating within prescribed ‘high-risk’ industries to report payments made to certain contractors to the ATO. The purpose of these requirements is to target the cash economy and general low compliance within a particular industry.
Since 1 July 2012 businesses in the building and construction industry have been required to report total payments made to each contractor for building and construction services each year. From 1 July 2018, it was expanded to the cleaning and courier industries. Then from 1 July 2019 the TPRS was extended to the following industries:
- Road freight services
- Information technology services
- Security, investigation, or surveillance services
Information to be reported in the Taxable Payments Annual Report for each contractor
- The Contractor’s ABN
- The Contractor’s name and address
- The gross amount paid to the contractor for the income year (including any GST)
Superannuation Guarantee Contributions (SGC)
Super Guarantee Changes
From 1 July 2022, employees can be eligible for a super guarantee (SG), regardless of how much they earn. This is because the $450 per month eligibility threshold for when SG is paid is being removed. However, employers need only pay super for workers under 18 when they work more than 30 hours in a week. The ATO also reminded employers that the SG rate will also increase from 10% to 10.5% on 1 July 2022. As a result, employers will need to use the new rate to calculate super on payments made to employees on or after 1 July, even if some or all the pay period is for work done before 1 July.
Ongoing Super Guarantee rate increase
The SG rate increases to 10.5% on 1 July 2022, and then continues to increase until it reaches 12% on 1 July 2025.
|1 July 2022||10.5%|
|1 July 2023||11%|
|1 July 2024||11.5%|
|1 July 2025||12%|
For more information on the superannuation guarantee click here for a detailed list.
Contributions must be paid quarterly. However, you can also choose to pay monthly or fortnightly.
Superannuation Guarantee Contribution Payment Due Dates
Superannuation guarantee contributions are payable to an employee’s superannuation fund by the 28th of the month following the quarter-end date, i.e., payment is due by 28 October for the quarter ended 30 September. Contributions for the June quarter must be received by the employee’s fund by 30 June for those contributions to be deductible to the employer in the current financial year.
Fringe Benefits – Motor Vehicles
The Fringe Benefits year runs from 1st April to 31st March and a benefit most commonly arises when a car that is owned or leased by a company or trust is made available for private use. You can calculate the taxable value of a car fringe benefit using either of the following methods:
- Statutory formula method – A single statutory rate of 20% applies regardless of kilometres travelled to all new car fringe benefits after 7.30 pm AEST on 10 May 2011. The taxable value of the car fringe benefit is the statutory rate multiplied by the car’s base value. Some older vehicles may still be subject to the progressive statutory rates based on kilometres travelled.
- Operating cost method – the taxable value of the car fringe benefit is a percentage of the total costs of running the car during the fringe benefits tax (FBT) year. The percentage varies with the extent of actual private use. A logbook must be kept for 12 consecutive weeks every 5 years. The private use percentage is applied to the total operating costs.
What vehicles are exempt from FBT?
From 1 April 2017, there are no exempt vehicles, you will need to address whether your vehicle met the new private use exemption.
The private use of a motor vehicle is exempt from FBT if all the following conditions are satisfied:
- the vehicle is a panel van, utility (ute), or other commercial vehicle (that is, one not designed principally to carry passengers)
- the employee’s private use of such a vehicle is limited to
- travel between home and work
- travel that is incidental to travel in the course of duties of employment
- non-work-related use that is minor, infrequent and irregular (e.g., occasional use of the vehicle to remove domestic rubbish).
Any loan from a company to a shareholder or associate (a related person or entity) which is still unpaid at the end of the financial year is usually treated as an assessable unfranked dividend to the shareholder unless the loan is made under a written loan agreement. A complying loan is either:
- an unsecured loan to be repaid within 7 years at a benchmark interest rate (minimum); or
- a loan fully secured by a real property mortgage of 25 years or less with a minimum benchmark interest rate
There is considerable time and cost involved in managing such loans which must be considered before borrowing funds from a company.
Business Name Renewal
Often, we get enquiries from clients about Business Name Renewals. Many third-party companies obtain lists of business names and their renewal dates. Some examples are:
- Registration Pty Ltd
- Registry Australia Pty Ltd
- Online Business Registration
Unless you receive your business name renewal direct from ASIC, often by email, then these renewals are just marketing that will ask for a fee to do the renewal process for you. The renewal from ASIC is quick and easy and will simply be a BPAY option to pay for the required renewal period. If unsure at any time, call our office for clarification.
ATO Warning re TFN and ABN Scams
The ATO is urging taxpayers to be vigilant following an increase in reports of fake websites offering TFNs and ABNs for a fee. The ATO states that the fake TFN and ABN services are often advertised on social media platforms like Facebook, Twitter, and Instagram – together with an offer to obtain a TFN or ABN for a fee. But instead of delivering this service, the scammer uses these fraudulent websites to steal both money and personal information.
We can help you with setting up your cloud-based accounting software. The programs we use and recommend are QuickBooks, MYOB, and Xero. Call us today for subscription costs. We are QuickBooks Certified Advisors. We can also offer online bank feeds of your bank statements directly into our software program should you wish to move away from manual bank statements and record-keeping at any time.
A few things you need to know…
Wilson Colman has changed the way we engage with our clients. This includes the use of our Client Portal and Adobe E-Sign for you and each of your entities that allows for digital signatures and document storage in an encrypted environment. Why are we doing this? Having an encrypted online portal means as a practice we can stay compliant with data security breach laws and provide our clients with an efficient document-sharing tool.
A bonus of having a client portal means you can obtain prior-year tax returns and documents at any time. If for any reason you do not wish to move forward with your secure portal, we will need you to sign a waiver for data security breach laws. Please reach out if you have any questions or queries.
MyGov and your Notice of Assessment
If you have ticked the box in MyGov to receive ALL ATO information, please be aware that your Notice of Assessment will go directly to your MyGov account and you will be notified of recent activity via your chosen method, i.e., email or text message. A paper copy will not be sent to you by Wilson Colman. Please keep your details up to date in MyGov. You can untick this choice if you would prefer we receive your ATO correspondence.
Our Credit Policy
Our terms for payment are 14 days from the date of the invoice within which our clients may settle their fees. Payment can be made by direct bank transfer, cash, EFTPOS, credit card, and cheque. When paying by direct bank transfer please use your client code as a reference so we can find your payment. Your client code is on your tax invoice.
Have you changed your details?
Have you changed your address, telephone number, or email address? Then we need to know. Please make sure you call our office or email us whenever your circumstances change and keep your details up to date.
If you have an ABN and your details have changed, you must notify our office within 28 days so that we can update the Australian Business Register on your behalf.
Do you have a Will?
By making a Will you are exercising your legal right of directing how your assets should be distributed. Only by having a Will can you be certain this will happen. When you make your own Will you also choose your executors who will manage your estate after you die. By choosing your executors carefully you can ensure that those responsible for distributing your estate understand your needs and wishes and those of your family.
Without a Will, Statute Law will dictate how your assets are divided. This could produce a result that may mean hardship to your family and be contrary to your wishes. We suggest you ensure you have a Will, and it is up to date.
Please take time to view our website. We offer other services from starting up a business, running a business, and bookkeeping services, to assisting you with your retirement needs.