Are you ready for 30 June 2022?

The 2022 end of financial year (EOFY) is fast approaching and you should be considering the available options that may just boost your Business or your Personal financial position. So, as thoughts turn to getting your house in order before the EOFY, what tips and traps should you be aware of?

Individual Tips

In preparing for your 2022 Income Tax Return, you may want to consider the following deductions that can give your tax refund a welcome boost:

Paying any professional or union fees before 30 June to claim the deduction for the whole amount this year.
Charitable donations over $2 are deductible as long as you have a receipt, and the charity is registered as a deductible gift recipient.
If you have some spare cash, you could make a personal contribution into your Super Fund, provided this doesn’t mean you’ll exceed $27,500 for the year (including employer contributions). This can be a great way to boost your retirement savings and claim a tax deduction. The Super Fund must receive your payment by 30 June and you need to advise the Super Fund that you intend to claim a tax deduction by completing a 'Notice of Intent to Claim' form (normally available on your Super Fund's website).
While there have been no significant changes to what can be claimed for 2022, it’s worth noting that you can continue to claim Personal Protective Equipment (PPE) expenses, if you were required to utilise gloves, face masks, sanitiser and antibacterial spray to perform your duties throughout the 2022 financial year (01/07/21 - 30/06/2022).
If you continued to worked remotely in the 2022 financial year, you are entitled to claim a Working from Home tax deduction. The shortcut method allowed in 2020 & 2021 has been extended for the 2022 financial year. This method allows taxpayers to calculate home office expenses at a rate of 80 cents per hour. To utilise the shortcut method, we need to know the number of hours you worked from home.

Individual Traps

Every year about this time, the Australian Taxation Office (ATO) announces it's hotspot for the year ahead. Essentially, the ATO will again be focussing on Work-related expenses.

From a work-related expenses perspective, it is still important to meet the three golden rules:

You must have spent the money yourself and weren't reimbursed,
The expense must be directly related to earning your income,
You must have a record to prove the expense.

The next area of focus for the ATO is on claims in relation to Investment Properties and holiday homes. The ATO will focus on:

Excessive interest expense claims.
Incorrect apportionment of rental income and expenses between owners
Incorrectly claiming deductions for capital expenses, such as such as legal costs associated with buying and selling a property and property improvements
Holiday homes that are not genuinely available for rent. Rental property owners should only claim for the periods the property is rented out or is genuinely available for rent. Periods of personal use can’t be claimed.

The key tip is to ensure you keep good records. The golden rule is; if you cannot substantiate it, you can’t claim it. So it’s essential to keep invoices, receipts and bank statements for all property expenditure, as well as proof that the property was available for rent, such as rental listings.

Another area of focus for the ATO is Cryptocurrency investment transactions. If you sold (this includes transferring) any cryptocurrency in the 2022 financial year, it is important that this gain or loss is reported in your 2022 Income Tax Return. Again, the key tip is to ensure you keep good records, including dates of transactions, the value in Australian dollars at the time of the transactions, what the transactions were for.

Low and middle income tax offset (LMITO) for the 2022 financial year

The full LMITO amount the 2022 financial year is $1500. If your taxable income is less than $126,000, you will receive some or all of the LMITO, when you complete your 2022 income tax return.

To assist in preparing your individual income tax return, please see our 2022 Taxation checklist.

Business Tips

In order to minimise your business tax payable and underpin your future business success, you may want to consider the following tax breaks and other opportunities:

Temporary Full Expensing on new business assets. The asset write-off rules allow eligible businesses to claim the total cost of new capital assets. All businesses with an aggregated annual turnover of less than $50 million are eligible to claim the total cost of new & second-hand depreciable assets and the total cost of improvements to existing eligible assets that are first used or installed by 30 June 2022. Eligible assets include anything that is used in the running of your business, such as computers; an office or shop fitout; tools for use on a work site; business equipment; phones; and point of sale systems. It also includes business-use motor vehicles, such as utes and delivery vans – but for passenger cars the claim is capped at $60,733.
Prepay expenses. For expenses covering no more than 12 months, an immediate deduction is generally available. This may include prepayments for insurance premiums, phone and internet services, subscriptions to trade or professional bodies and rent on your business premises.
Delay invoicing. Deferring taxable income to the next financial year can help cut your tax in the current financial year
Write-off bad debts. While no business wants to be in a position where they can’t recover a debt, it does happen. If your business has to write off a debt, a tax deduction is available for the amount of the debt written off.
Pay superannuation. Ensure all June quarter superannuation contributions are paid by 30 June to accelerate your tax deduction. To meet this requirement, the contributions must be paid, cleared in the business bank account and received by the employee’s super fund before 30 June.
Get the right trading stock valuation. Damaged and obsolete stock can be written down or written off entirely and a tax deduction claimed.
Business tax rate reduced. The tax rate for most companies drops from 26% to 25% for the 2022 financial year. The tax offset for unincorporated small businesses has increased from 13% in 2021 to 16% for 2022. This applies to sole traders or those who have a share of net small business income from a partnership or trust (Unfortunately, the offset remains capped at a maximum of $1000).

Business Traps

Record keeping is the foundation of all declared business income and expenses. You must have a record to substantiate the income and deductible expenses reported in your annual business tax return.

To assist in preparing your business income tax return, please see our 2022 Taxation checklist.

Superannuation Changes for the 2023 financial year

From 1 July 2022, two important Superannuation Guarantee (SG) changes will apply to your business. These are:

you'll need to increase your employee's SG contribution rate from 10% to 10.5%
the $450 per month SG eligibility threshold (for when superannuation is paid) is being removed. This means employees can be eligible for SG, regardless of how much they earn.

Let’s have a chat

Of course, tread carefully and don’t let tax drive your business and/or investment decisions. You should determine whether the strategies will suit your circumstances. If you have any questions, let’s set up a time to discuss. Email me at cam@nationaltaxation.com.au or call me on 0411 034 275.

Disclaimer

The information presented is general in nature and not to be used, relied or acted upon without seeking professional advice to ensure that the information appropriate for your individual circumstances. National Taxation accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. www.nationaltaxation.com.au. ABN 63 665 545 130.