It’s been a big end to the year and post Budget 2022 there is plenty to keep our eyes on.
A series of reforms and changes will commence on 1 July 2022. We look at what’s coming up for you, your business and your super.
Business Owners
Plenty happening with Superannuation this year and into the next few years.
The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will continue to increase by 0.5% each year until it reaches 12% on 1 July 2025. if you hire employees your employment agreements will determine what this means.
For example:
If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%.
For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.
$450 super guarantee threshold removed
From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week
Profits of professional services firms
The ATO will introduce new guidance from 1 July 2022, takes a strong stance on structures designed to divert income in a way that results in principal practitioners receiving relatively small amounts of income personally for their work and reducing their taxable income. Specifically, they are concerned about how many professional services firms are structured such as lawyers, accountants, architects, medical practices, engineers, architects etc., operating through trusts, companies and partnerships of discretionary trusts and how the profits from these practices are being taxed.
Professional firms should assess their structures to understand their risk, and if necessary, either make changes to reduce their risks level.
Lowering tax instalments for small businesses – PAYG
GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift.
For the 2022-23 income year, the Government has set this uplift factor at 2% instead of the 10%. The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year:
• Up to $10 million annual aggregated turnover for GST instalments, and
• $50 million annual aggregated turnover for PAYG instalments
Trust distributions to companies
The ATO recently released a draft tax determination dealing specifically with unpaid distributions owed by trusts to corporate beneficiaries. If certain steps are not taken, such as placing the unpaid amount under a complying loan agreement, these amounts can be treated as deemed unfranked dividends for tax purposes and taxable at the taxpayer’s marginal tax rate. The new guidance applies to trust entitlements arising on or after 1 July 2022.
Individuals
Home loan guarantee scheme extended
An additional 25,000 guarantees will be available for eligible first home owners (35,000 per year), and 2,500 additional single parent family home guarantees (5,000 per year).
Your superannuation
Work-test repeal – enabling those under 75 to contribute to super
From 1 July 2022, the work-test has been scrapped and individuals aged younger than 75 years will be able to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.
Downsizer contributions from age 60
From 1 July 2022, eligible individuals aged 60 years or older can choose to make a ‘downsizer contribution’ into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home.
First home saver scheme
The First Home Super Saver Scheme enables first home buyers to withdraw voluntary contributions they have made to superannuation and any associated earnings, to put toward the cost of a first home.
From 1 July 2022, the maximum amount will increase to $50,000. The benefit of this scheme is the concessional tax treatment of superannuation.
Please reach out to the team at Flux Advisors to discuss these changes in more detail.