Super, allowable deductions & asset write-offs - Get tax time ready.
Whether its superannuation, allowable deductions or small business asset write-offs, working with a finance professional or going it alone, make sure you are prepared for tax time with our list of planning tips.
1. Increase in Superannuation Guarantee rate
As of 1 July 2022, the Superannuation Guarantee (SG) rate rises to 10.50%, with further increases to come each year until 1 July 2025.
For some people this will mean their take home pay will reduce as more of their salary is directed towards super.
It is important to find out if you are affected by this change, and if necessary, see if you can negotiate an appropriate increase to your total package to minimise any potential impact.
2. Super contribution
Individuals can make personal concessional contributions from pre-tax funds to claim a tax deduction in their income tax returns for the year ended 30 June 2022. It is important to note that the super fund must receive the contribution by 30 June 2022 to secure the tax deduction.
The general concessional contributions cap is $27,500 for the 2022 financial year and includes any employer super guarantee contributions that have been received.
Carry Forward Concessional Contributions
Where you have an unused concessional cap amount from the 2019 through to 2021 financial years, the carry-forward arrangement may be utilised to make extra concessional contributions in the 2022 financial year.
This arrangement is available if your total superannuation balance as at 30 June 2021 was less than $500,000.
This can be particularly useful where you may have triggered a large capital gain this financial year.
Individuals are able to make non-concessional contributions for the year ended 30 June 2022 where their superannuation balance is less than $1.7 million as at 30 June 2021.
These contributions are not tax deductible and are not taxable in the superannuation fund. The non-concessional contributions cap for the 2022 financial year is $110,000.
If you earn less than $56,112 (the upper limit for the 2021/22 financial year) and make an after-tax contribution to your Super account, then the Government may also contribute.
The amount you will receive depends on how much you earn and how much you contribute.
If you earn less than $41,112 (the lower limit for the 2021/22 financial year), then for every dollar you pay in the Government will add 50 cents, up to a maximum of $500.
3. Working from home expense deductions
For the 2022 financial year, you may consider utilising the shortcut method to claim a fixed rate of $0.80 per hour worked from home.
This covers expenses including telephone, interest, electricity and depreciation on furniture and equipment. To substantiate this, individuals should have some record of the hours worked from home, including a timesheet, roster, or diary.
However, depending on your records available, you may find that a higher deduction is available using either the actual cost or fixed rate method.
4. Small business immediate asset write-off threshold
The Instant Asset Write-Off has been extended with a measure dubbed ‘Temporary Full Expensing’.
You can claim your deduction when lodging your 2021-22 or 2022/23 tax returns.
It is estimated that millions of Australian businesses will be eligible for the scheme in a move set to encourage spending among businesses.
Temporary Full Expensing allows for an immediate deduction for purchases of new, eligible depreciating assets (for businesses with an aggregated turnover under $5 billion), eligible second-hand assets (for businesses with an aggregated turnover under $50 million) and the balance of a small business pool at the end of each income year in the period (for businesses with an aggregated turnover under $10 million).
5. Prepaid expenses
Running your own business can be expensive, but you may be able to claim some running expenses as tax deductions – including ones you pay for ahead of time.
Prepaying some expenses before 30 June can increase your allowable deductions for the financial year in which they are paid. Eligible expenses include those that have a service period of 12 months or less, for example, annual policies, utility bills or professional subscriptions.
Keep in mind that if you claim them this year, you will not be able to claim them next year meaning you may have more tax to pay next year.
If you are looking for further assistance when preparing for tax time, contact the FinancePath team and we can refer you to one of our trusted partners to assist with your requirements.
Thank you to Michael Forer at Wealth Planners for his assistance in preparing this article.
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