End of Financial Year 2022 Newsletter
Be organised this EOFY
With the end of financial year approaching, we’ve designed this newsletter to help you get organised and ensure you’re aware of all the potential deductions you’re eligible for, as well as your reporting responsibilities.
In this edition you’ll find information on superannuation, business deductions including new boosts included in the most recent Budget, personal work-related expenses, and a reminder about Director IDs.
All Vargiu Accountant clients have access to a Client Portal which contains helpful checklists and forms to assist you in preparing your tax return. If you are a new client or don’t yet have an active Client Portal, please get in touch with our team and we’ll set this up for you.
In addition to being a helpful resource come tax time, the Client Portal is designed to be used all year round, as clients can upload relevant forms and information throughout the year, creating less work for you at the end of financial year.
If you have any questions about the information in this newsletter or other matters relating to the end of financial year, please contact our team.
Warm regards,
Vargiu Accountants
Super contributions
Concessional contributions
The superannuation concessional cap is $27,500, so be sure to make sure any personal deductions have been made prior to 30June 2022.
As a general rule, super contributions count towards members’ contributions cap in the financial year the contribution is made. A contribution is considered ‘made’ once the funds are received by the super provider. Therefore, it is essential that the transaction be made a few days prior to 30June 2022 to allow time for it to clear and land in the fund’s account before the deadline.
Unused concessional contributions
Since the 2019-20 financial year, the carry-forward rule allows you to make extra concessional super contributions above the general concessional contributions cap without having to pay tax. The carry-forward rule works by accessing unused concessional 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 contributions cap. Unused cap amounts are available for a maximum of five years. To use your unused cap amounts, you need to meet two conditions:
- Your total super balance at the end of 30 June of the previous year is less than $500,000
- You made concessional contributions in the financial year that exceeded your general concession contributions cap
For assistance on how to view and carry forward your unused concessional contributions, visit the ATO website here.
Self-managed super and minimum pension payments
To assist retirees, the Government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities, and market-linked pensions and annuities by 50% for the 2019–20, 2020–21, 2021–22 and 2022-23 financial years.
To avoid breaching self-managed superfund compliance, please ensure the minimum amount has been withdrawn from your self-managed superfund. If the fund fails to meet the minimum pension payment requirements in an income year, the super income stream will be considered to have ceased at the start of that income year for income tax purposes.
To find out more and to calculate your minimum annual payment, visit the ATO website here.
Updates to the Superannuation Guarantee Contribution (SGC)
As of 1 July 2022, the Superannuation Guarantee Contribution will increase to 10.5 percent, this coincides with the removal of the $450 threshold for super to be paid. This means more employers will be paying out more superannuation with each pay run from the beginning of the new financial year.
Claiming new business assets and equipment
Instant asset write-off
There have been some recent changes to the instant asset write-off rules, which are important to note.
For assets first used or installed ready for use between 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, the instant asset write-off:
- Threshold amount for each asset is $150,000 (up from $30,000)
- Eligibility extends to businesses with an aggregated turnover of less than $500 million (up from $50 million)
Temporary full expensing
Assets purchased from 6October 2020 until 30 June 2023 will follow temporary full expensing guidelines which mean that only the business portion of the asset can be claimed. Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use. From 1 January 2021, the instant asset write-off will only be available for businesses with a turnover of less than $10 million and threshold amount of $150,000.
To learn more about instant asset write-offs and your business’ eligibility, please refer to the ATO website here.
Car threshold limit
The car threshold limit for the 2021-22 income year is $60,733.
For more information on vehicle claims, refer to the ATO website here.
Loss carry back tax offset
Eligible entities can use this offset to carry back losses from earlier years where there was an income tax liability. To be eligible for a loss carry back tax offset, you must have:
- Made a tax loss in the 2019-20, 2020-21, 2021-22 income year
- Had an income tax liability for the 2018-19, 2019-20, 2020-21 or 2021-22 income years
- A surplus in your franking account at the end of the income year which you are claiming the tax offset
A tax loss can only be claimed as an offset once. You cannot carry back:
- Capital losses
- Losses arising from the conversion of excess franking offsets
- Transferred losses relating to either
- Foreign banking groups
- Head companies of consolidated groups
For more information on the loss carry back tax offset and to check your eligibility, refer to the ATO overview here.
Business deduction boosts in the 2022/2023 Federal Budget
The 2022/2023 budget has introduced new rules around tax deductions that can help businesses adapt to changing circumstances and invest in more training for their employees. The new rules apply to expenses made after budget night (7 30pm AEDT on 29 March 2022) up to 30June 2024.
Small and medium-sized businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20% of expenditure incurred on the following:
- Skills and training boost — Expenses incurred on external training courses provided to employees. The training course must be delivered by entities registered in Australia either in-person or online. This excludes in-house or on-the-job training.
- Technology investment boost — For expenses incurred on depreciating assets that support a business’ digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services, there will be an annual cap of $100,000 for deductions claimed for this boost. This equates to an additional deduction of $20,000 that can be made.
If you are claiming expenses for investments in either of these boosts up to 30June 2022, the boost will be claimed on tax returns the following financial year.
Work Related Expenses
Creating systems to help you keep track of and file work related expenses throughout the year (whether they be hard copies or digital copies using an app or software), will enable you to save a lot of time and headaches come the end of financial year.
To claim a deduction for a work-related expense, you must meet all three of the following rules:
- You must have spent the money yourself and weren't reimbursed
- The expenses must directly relate to earning your income
- You must have a record to prove it (usually a receipt)
If the expense was for both work and private purposes, you only claim a deduction for the work-related use. You can't claim a deduction if your employer pays for or reimburses you for any of these costs.
For more information on work related expenses, visit the ATO’s website here.
Working from home deductions
The ATO has maintained its temporary shortcut method to make it simpler to claim home office expenses. The shortcut can now be applied up until 30 June 2022.
Using this method, you:
- Can claim 80 cents per hour for each hour you work from home
- Can't claim any other expenses for working from home, even if you bought new equipment
The shortcut method covers all your working from home expenses, such as:
- Phone expenses
- Internet expenses
- The decline in value of equipment and furniture
- Electricity and gas for heating, cooling, and lighting
For more information on working from home deductions and how to make a claim, visit the ATO’s website here.
Director ID
Finally, we’d like to remind all current directors that the due dates for applying for a director ID are as follows:
Date you were appointed Date you must apply by
On or before 31 October 2021 30 November 2022
Between 1 November 2021 and 4 April 2022 Within 28 days of appointment
From 5 April 2022 Before appointed director
In order to apply for a Director ID, you will need a MyGovID with a standard security strength (requiring two identity documents, such as your driver’s licence and Medicare card) as well as two of the following documents:
- Bank account details
- ATO Notice of Assessment
- Super account details
- A dividend statement
- A Centrelink payment summary
- A PAYG payment summary
