- Individual Income Tax rates will be lower for some people in 2022 so if income can be deferred until the next year, a tax saving might be available.
- Home office claims for individuals will be common given the many COVID 19 lockdowns. As indicated elsewhere in this newsletter the ATO are scrutinising this and you need to ensure your claim is permissible.
- An outright tax deduction is available for the purchase of depreciable asset used in a taxpayers business. There have been various thresholds that apply to this type of deduction, currently there are “temporary full expensing” provisions where outright deductions are available for new and used assets bought from 6 Oct 2020 and the business has a turnover of less than $50million, with no limit re the value of the asset.
- Tip: even though this is available, it may not be in your best interest to apply the rules as it may drive your Taxable Income to a loss position and when you sell the asset the whole proceeds will be assessable income, hence pushing your income into a higher tax bracket.
- It has long been the case that in many circumstances, a deduction can be claimed for a net Taxable loss suffered in a prior year. However, for the 2021 and 2022 years, new loss carry-back rules enable a loss suffered in the 2020 to 2022 years to be claimed against a tax payable result in the 2019 year, effectively providing a current year refund for taxes paid in 2019. There are specific rules associated with these provisions, however, they could provide a cash injection of past taxes paid.
- If you are in business consider whether any amounts owed to you by customers are “bad” ie not collectable. If so the debt should be written off in the entities books to claim a tax deduction for it, by 30 June 2021. There should be sufficient proof to indicate the debt is bad and not just doubtful. Talk to us if you are unsure.
- Consider the unused Concessional Contributions cap rules that allow you to claim a tax deduction for Superannuation contributions above the cap of $25,000 for 30 June 2021, where the cap has not been fully utilised for 2019 and or 2020. This can be advantageous especially if you had a spike in income eg from the sale of a Capital Gains taxed asset. However ensure you get advice about the amount to be contributed so that you only use up to your total adjusted cap.
- The value of Inventory can have a significant impact on the Taxable Income of an entity. Hence consideration should be given to ensure the stock take only includes items held as at 30 June 2021, and that the value per item is reduced below cost if it is unable to be sold for that amount.
- From 1 July 2020 the requirement to pass a work test was increased from 65 to 67 years of age. Hence you may be fully retired and want to make a contribution to Superannuation but over the age of 65. There may now been a window for you to continue making a contribution should this be advantageous to you.
- Companies that are Small Business entities will have a lower tax rate for the year ended 30 June 2022 ie it will decrease from 26% to 25%. On this basis if some income of the company can be legally deferred to the 2022 year a lesser rate of tax will apply to it.
- The Decrease in company tax rate also means that the Franking Credit attached to any dividends will be lower. On this basis, it may be worthwhile considering bringing forward the payment of dividends to obtain the higher franking credit rate of 26%.
