BY ALL ACCOUNTS
Financial year end planning & changes As the 2022 financial year-end approaches, everyone wants to know what can be done to reduce their tax liabilities. A great question. But another question in return, does your business need anything? If so, buy what you need and yes there it may be tax effective to bring forward business related purchases prior to July to benefit from the tax deduction in the current year, a bird in the hand is worth two in the bush and all that jazz. But, if you are looking to spend money with the sole goal of saving tax, my answer will always be to save your money. Why spend a dollar to save cents in tax? In saying that, if you haven’t already turned your mind to tax planning, there are certainly some tax effective strategies you might consider prior to June 30… Immediate tax deduction for business asset purchases is available for assets acquired, installed and ready for use by June 30, 2023, with no limit to the cost of the asset, where the turnover of your business is less than $50 million. Immediate tax deductions for prepaid expenditure provided the period to which the expense relates is less than 12 months (think prepaid interest, insurance etc.,). Small Business Technology Investment Boost allows small businesses to claim a tax deduction for 120 percent of eligible business expenditure and depreciating asset purchases which supports them adopting digital service such as portable payment devices, cyber security systems or subscription to cloud based services. So, if you are looking to move your systems to the Cloud, and
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Lel Parnis, Principal, Holmans why wouldn’t you? Then there’s an additional 20 percent tax deduction for eligible costs incurred from 7.30pm March 29, 2022, until June 30, 2023. For expenditure incurred between March 29, 2022, and June 30, 2022, 100 percent of the expenditure is claimed as usual in the 2022 income tax return with the additional 20 percent deduction clamed in the 2023 income tax return. For eligible expenditure incurred from July 1, 2022, the full 120 percent deduction will be claimed in the 2023 tax return. There is an annual $100k cap to each qualifying income year, so there is a benefit to spreading expenditure over 2022 and 2023 financial years. Any additional expenditure is still tax deductible under ordinary provisions, you are just capped for the 120 percent deduction. Small Business Skills and Training Boost similarly allows small businesses to deduct $1.20 for every $1 spent on external training courses for employees provided in Australia or online by registered training organisations. There is no cap on the 120 percent claim for eligible training expenditure incurred from 7.30pm March 29, 2022, and June 30, 2024. Note: The Small Business Technology Investment and Skills & Training Boosts were announced in the 2022 Federal Budget but are yet to be enacted.
Pay employee super by June 30, superannuation contributions are only ever tax deductible when paid, if paid on time. To ensure a tax deduction for employer superannuation contribution on wages for the final quarter of the 2022 financial year ensure superannuation contributions for employees are paid and cleared by June 30, 2022. The concessional superannuation contributions cap for the year ending June 30, 2022, is $27,500. Bear in mind when making any lump sum contributions prior to year-end, that concessional contributions include personal and employer contributions made on your behalf to avoid potential excess contributions taxes. If your super fund(s) balance is less than $500k you may be able to make additional tax-deductible concessional contributions for any unused cap amounts for the 2019, 2020 and 2021 financial years. So, if you made no concessional contributions to date, you may be eligible to claim a tax deduction for up to $75k (3 x $25k prior year concessional caps) plus the current year concessional cap of $27,500 totalling $102,500 in potential tax-deductible superannuation contributions.
Get ready for super changes from July 1, 2022 Removal of the $450 per month threshold for employer super contributions. From July 1, 2022, employees may be eligible for super guarantee (SG) regardless of how much they earn. For workers under the age of 18, super is only payable where more than 30 hours are worked per week. The super guarantee rate will increase from 10 percent to 10.5 percent on July 1, 2022. You will need to ensure the new
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rate is applied in your payroll system for any payments made from July 1, 2022, even where some or all pay period is for work completed prior to July 1. The SG rate is legislated to increase to 12 percent by 2025. Changes to the ‘work-test’ for personal super contributions from July 1, 2022 Currently the ‘work test’ requires persons aged 67-74 years to have been ‘gainfully employed’ for a minimum of 40 hours in a 30-day period during the relevant financial year in order to make voluntary (concessional and nonconcessional) contributions to their super funds. From July 1, 2022, the work test will be removed except where the individual intends to claim a tax deduction for the superannuation contribution. Further, individuals who were previously unable to access the bring forward nonconcessional contributions rule may be able to make additional non-concessional contributions from July 1, 2022. Please be advised, you should always liaise with your financial advisor and superannuation funds to confirm eligibility prior to making contributions to your fund(s) to avoid unintended penalties and/or excess contributions taxes. Disclaimer: This article contains general information only. Regrettably, no responsibility can be accepted for errors, omissions, or possible misleading statements or for any action taken as a result of any material in this guide. It is not designed to be a substitute for professional advice, as such a brief guide cannot hope to cover all circumstances and conditions applying to the law as it relates to these items. ResortNews | June 2022
