From the BB roundtable: Top tax tips you need to know in 2022

From the BB roundtable: Top tax tips you need to know in 2022

Wondering how you can more effectively manage your financial affairs as another EOFY comes around?

Here are some quick pointers from our tax managers – for individuals and businesses – to keep up your sleeves.

On trust distributions (Section 100A) – Rebecca Fitzpatrick

Earlier this year, the ATO released a draft ruling and guidance on how it will apply anti-avoidance measures to crack down on the use of discretionary trust structures for reducing tax.

This ruling will change the way the ATO applies Section 100A and affects how discretionary trusts determine distributions – particularly in situations where there are adult children or other low-income beneficiaries.

Although these documents are not yet finalised, the ATO’s view is that businesses should consider this change for the 2022 financial year.

So for 30 June 2022, we recommend that you make trust distribution arrangements in accordance to the new ATO guidelines. But we may need to continue reviewing these guidelines since they’re still in draft versions.

In other words: keep this new ruling in mind, but check with your accountant (or contact us) to understand the actual implications for you.

On bad debts and trading stock – Fiona Hempstead

If your business accounts for income on an accruals basis, you might want to review accounts receivable for bad debts. Timing is critical as bad debts are deductible in the year they are written off.

If your business holds trading stock, the closing value of that stock on 30 June 2022 has an impact on your taxable income for the year.

A few things to consider:

  • If you’re a small-and-medium business with consistent stock value, you might be able to access modified trading stock rules to estimate the value of your inventory.
  • Check that your inventory system is showing accurate stock levels. Consider running spot checks or partial stocktakes throughout the year, and review your stock list for obsolete or lost stock.
  • Conduct a stocktake to determine your inventory value on 30 June 2022, ideally with all three valuation options of cost, market selling value and replacement value.

On temporary full expensing – Dylan Valentine

Making a tax-deductible purchase is a great way to reduce your taxable income.

And thanks to the temporary full expensing provisions, buying new – and in certain cases, second hand – assets can significantly reduce your taxable income.

If your business has an aggregated turnover of less than $5 billion, it may be eligible for an immediate tax deduction for the cost of an asset – in the year it’s first used or installed.

But remember: the 2023 financial year is the last year to take advantage of the temporary full expensing provisions.

Also, you might make a tax loss after claiming an immediate tax deduction under these provisions. Instead of carrying the tax loss forward, consider your company’s eligibility for a refundable tax offset under the loss carry back provisions.

On maximising superannuation contributions – Grant Vickers

Depending on your circumstances, you might want to consider salary sacrificing or personally contributing concessional contributions (up to the $27,500 cap) before 30 June 2022. This may allow you to receive a tax deduction on the amounts contributed – and help increase your super balance.

If you have not used your full concessional contribution cap in prior years, you may be eligible to make contributions above the current year cap, and receive additional tax deductions. Note that there are strict eligibility requirements before this can be done.

Another important thing to note: from 1 July 2022, people between 65 and 75 years of age will no longer have to meet the work test to make certain super contributions. Which means you may have new opportunities to add to your super next financial year.

Before making any additional contributions, confirm your eligibility with your accountant.

On superannuation tips for employers – Lachlan Quinn

As employers, you need to ensure all superannuation contributions for employees are paid and received by the super fund by 30 June 2022 – so you can get the income tax deduction in the financial year.

From 1 July 2022, there will also be two significant changes to Superannuation Guarantee Contributions (SGC):

  • The SGC rate will increase from 10% to 10.5%. Depending on your employment contract structures, this may mean an increase in cost to you, or a re-allocation between super and wages for your employees.
  • The $450 monthly wage threshold for SGC will be removed. So all employees, regardless of the monthly amount they earn, will need to have SGC paid to their super funds.

On motor vehicle deductions – David Vitez

When travelling for work, you can claim your motor vehicle expenses two ways: the cents-per-kilometre method, or the logbook method.

If you travel extensively for work, it’s better to use the logbook method, as it allows you to claim more deductions in your tax return. But of course, you’ll need to fill out a logbook, which may feel tedious and time-consuming.

The good news is you’ll only need to fill out the logbook for 12 weeks. Then you can expect to rely on that for five years, unless things change.

The logbook will help you work out how much of your travel in those 12 weeks is work-related. Once you know the percentage, you can apply it to all your motor vehicle expenses, and include that in your tax return.

These tax tips are based on our interpretation of the Australian taxation law. But they may or may not apply to your specific circumstances – and may be challenged by the ATO if applied inaccurately.

To ensure that you benefit from the right advice, get in touch with us today.