As we approach the end of the 2022 financial year, it is an opportune time for you to review your situation in order to ensure that you are maximising your position and deductions for your 2022 income tax return. The tax return process is made more efficient if you have all of your documentary evidence organised now, rather than trying to find the documents in the months ahead.
Here are some of our top tax planning tips:
Depositing into Superannuation and the tax benefits
If you intend on making a superannuation contribution in order to claim a tax deduction, you should do so immediately. Many superannuation funds are requesting that contributions be made prior to 24 June 2022, in order to be considered as a 2022 contribution.
The cap for tax deductible (concessional) superannuation contributions is $27,500 a year. This includes both the employer contributions and member contributions that you make. It is possible to exceed this cap in a year if your superannuation balance is less than $500,000, and you have not used up your yearly cap in the previous three years.
If you are not considering making a tax deductible contribution into your super fund, there is also the ability to claim the Co-Contribution Scheme of the Government. In order to claim the Co-Contribution Scheme, you must contribute up to $1,000 into your super fund, and then the Government will contribute a further $500 into your super fund if your total income is below $41,112 for the 2022 year. To be eligible to receive the Co-Contribution at least 10% of your total income must come from employment or business income.
Another benefit that is available is contributing into the super fund of your spouse. You are able to claim a 18% tax offset up to a maximum $540 for a contribution of up to $3,000 that was made into the super fund of your spouse. This tax offset is available if the income of your spouse is below $37,000.
We recommend that you speak to us prior to making a contribution into your super fund in order to ensure that you are making the best use of your super contributions.
Home Office Claims
If you have worked from home, there are three methods that can be used in order to claim tax deductions for the expenses (such as power, phone and internet costs):
- The Actual Cost Method – Involves claiming the actual work-related portion of your running expenses.
- The Fixed Rate Method – Includes a rate of $0.52 cents per hour, plus any work-related portion of your other home office expenses (such as phone and internet costs).
- The Temporary Shortcut Method – Includes a rate of $0.80 cents for all of the running expenses (including phone and internet costs). This method has been extended until 30 June 2022.
If you intend to apply the fixed rate method or the temporary shortcut method, you must maintain a time diary for at least one month out of a 12-month period, recording the number of hours that you worked from home.
Motor Vehicle Claims
If you have used your car for work, there are two methods that can be used in order to claim tax deductions for the expenses:
- Cents per Kilometre Method – Involves claiming a tax deduction that is based on a reasonable estimate of the number of work kilometres that you travelled for the financial year (maximum 5,000 km).
- Logbook Method – Involves claiming the actual work-related portion of the running expenses. Please note that you will be required to keep a valid logbook for a continuous 12-week period every five years. There is also a requirement that an odometer reading is recorded on 30 June each year in order to claim your expenses via this method.
If you are considering making tax-deductible donations in the coming months, it may be beneficial to bring forward the donations to before 30 June 2022 in order to claim them as tax deductions in your 2022 income tax return.
If you are intending on claiming a donation, you should ensure that the organisation that you are giving to is registered as a Deductible Gift Recipient (DGR). Your receipt will also indicate if the donation is tax deductible.
The tax deduction will be claimed based on the name/s that are listed on the receipt.
Consider selling your loss assets (such as shares) prior to 30 June 2022 in order to help offset the capital gains that are made from your other assets that were sold during the 2022 year.
If you are a trustee of a discretionary trust, you must document (before 30 June 2022) how the yearly trust income will be distributed among the beneficiaries for the year.
Employee Superannuation Payments
While Super Guarantee Contributions are not due until 28 July 2022, they must be paid and accepted by the super fund prior to 30 June 2022 in order to qualify for a tax deduction in the 2022 financial year. It may be considerable to bring forward the June quarter contribution payments, and we recommend allowing plenty of time for it to reach the super fund.
Please also note that the superannuation guarantee rate will increase from 10% to 10.5% from 1 July 2022.
Temporary Full Expensing
Businesses with an aggregate turnover of less than $5 billion can claim immediate deductions on the business portion of the cost of the eligible depreciable assets. Eligible assets must be first held, first used or installed ready for use between 6 October 2020 and 30 June 2023.
For small or medium taxpayers (those with turnovers that are less than $50 million), the immediate deduction also applies to second-hand assets. Please note that car purchase deductions are still subject to the depreciation car limit ($60,733 for the 2022 year). The timing of the tax deduction is when the asset is installed ready for use.
We recommend that you review your debtors list for any uncollectable amounts and write off any debts that are deemed irrecoverable. This will allow you to claim a tax deduction for these bad debts during the year.
If you are the director of a company and plan on declaring a dividend, you are required to document a dividend resolution prior to 30 June 2022.