Essential Tax & Super Update: All the important info you need this new financial year

1. Covid 19 Payments – get to know what payments are taxed and why

If you received a COVID-19 disaster payment during 2021–22, this was because your state or territory health orders prevented you from working in your usual employment – and for that reason this payment is exempt from income tax and you do not include the payment in your tax return.

If you received a pandemic leave disaster payment during 2021–22, you must include it in your tax return as income because this payment was in lieu of income you would have earned had you not been self-isolating, quarantining at home, or caring for someone with COVID-19.

2. Deductions for COVID-19 Tests – what tests you can claim a tax reduction for

Any expenses you incurred purchasing any type of COVID-19 tests should be approached in the same way as any other expenses in terms of your work-related activity. You should only claim costs for a COVID-19 test if you needed the test for work purposes.

You should also apply a work-related portion of costs claimed for multipacks of COVID-19 tests you purchased. For example, if you purchased a pack of 20 or 30 tests, you should work out the cost per unit and only claim those tests that you used in order to attend or travel to work.

3. Don’t forget the good news on Granny Flats – you may not have to pay CGT

With the unusual year we’ve had so far, we thought we’d remind you about the Granny Flat Capital Gains Tax legislation changes that took effect from 1^st July last year. Since then, the creation of a ‘Granny Flat Arrangement’ can offer legal exemption from Capital Gains Tax.

A Granny Flat Agreement is a written contract that gives an eligible person the right to occupy a property for life. If such an agreement is being created, varied, or terminated, no Capital Gains Tax is payable. This is a powerful benefit that’s proved very helpful to many Australians recently.

1. Temporary full expensing – expanded and extended to 30 June 2023

In 2020, the Australian Government introduced temporary tax incentives to help Australian businesses withstand the impacts of COVID-19. One of these temporary tax incentives was temporary full expensing, so all capital expenses can be classed as operating costs.

Full expensing has been extended for eligible businesses until 30 June 2023. What’s more is that eligible corporate tax entities can now include the cost of depreciating capital works assets in their expensing – if the total cost of depreciating assets across 2016 to 2019 tax years exceeds $100m.

2. ATO introduces new ‘loss carry back’ tool – check your eligibility easily

Loss carry back provides refundable tax offsets, which can reduce the amount of tax you are liable to pay to zero and result in a refundable amount. The amount of tax offset may be affected by your net exempt income, income tax liabilities, and the surplus in your franking account.

You can now use the ATO’s loss carry back tax offset tool to help you work out if you are eligible to claim the loss carry back tax offset. If you are eligible, you can use the calculator to work out the maximum loss carry back tax offset you can choose to claim.

3.  Changes to R&D tax incentives and Offshore Banking Units (OBUs)

Changes have been introduced to the Research & Development tax incentive, which include how the R&D tax offset is calculated, R&D expenditure thresholds, and other integrity measures. The changes apply from the first income year commencing on or after 1 July 2021.

Also, the concessional tax treatment for Offshore Banking Units (OBUs) in offshore banking activities will be removed, effective from the 2023–24 income year, and the interest withholding tax exemption for OBUs will be removed for interest paid on or after 1 January 2024.

1. Increase to the maximum number of members allowed in a SMSF – from 4 to 6

The maximum number of members allowed in a single self-managed super fund, and small APRA-regulated super fund, has been increased from four to six members – which will open exciting doors for SMSF members in terms of what investment outcomes can be achieved.

2. Removal of requirement for Actuarial Certificate for small super funds

For assessments of the 2021–22 income year onwards, the requirement for trustees of small super funds (no more than six members) to obtain an Actuarial Certificate when calculating exempt current pension income (ECPI) has been removed.

3. New choice of calculation method for ECPI for complying super funds

Legislative amendments to enhance super outcomes for Australians now allows eligible super trustees to choose their own preferred method of calculating ECPI – if all of the fund’s assets are held to discharge liabilities for retirement phase interests for part, but not all, of the income year.

In addition to advising us not to jump the gun and lodge too early – because employers and other organisations have until the end of July to supply our tax documentation – the ATO has also confirmed four key areas of interest that it will be focussing on this year:

• Record Keeping. Make sure your records and documentation are consistent and clear.
• Work-related expenses. With so much working from home, it’s easier to make mistakes.
• Rental property. The ATO will be carefully reviewing rental income and deductions.
• Capital Gains Tax. With a focus on crypto assets, property and shares.