Temporary full expensing
From 7:30pm AEDT 6 October 2020, businesses with turnover under $5.0bn can deduct 100% depreciation on business- use of assets:
• First used; or
• Installed and ready for use by 30 June 2023
• eligible assets of small business entities using the simplified depreciation rules and the balance of their small business pool.
• If writing off second-hand assets, only businesses with turnover under $50m are eligible.
If business (i.e. annual turnover less than $5billion), consider spending on depreciating asset which is immediately deductible for the 2022 year if purchased before 30 June 2022 and installed ready for use.
Note passenger vehicles limited to claim for $60,733 being ATO imposed cost limit.
Eligible assets egs – cars, vans, kitchens, machinery, etc. Not eligible items are stock, software for business and Marketing costs.
Companies – Loss carry back rules – dealing with losses 2022
Loss carry back allows losses incurred in 2020, 2021, 2022 and 2023 years to be offset against prior profits made in or after the 2018-19 financial year. The effect – can get a refundable tax offset – i.e., cash back for tax on prior year profits.
Conditions apply i.e., need to be corporate entity, turnover < 5 billion, entity has lodged current tax return and past 5 years tax return.
The limitations: The amount cannot exceed:
• the amount of earlier tax paid by the entity; and
• the entity’s franking account balance at the end of the income year for which the refundable tax offset is claimed.
Company tax rate cut for small businesses remain at 25% for the 2023 year
Small business company income tax rate was 26% for 2021 year. From 1 July 2021 company tax rate reduced to 25%.
For the 2020/2021 year the threshold as to what is small business has remained at $50 Million. Note that turnover of connected entities is included in the calculation of company turnover. For 2021/22 the threshold has remained at $50 Million. All other companies will continue to be subject to the current 30% tax rate on all their taxable income
Superannuation Guarantee rate increased from 10%.5 to 11% from 1 July 2023
Small Business Technology Investment Boost from 7:30 pm AEDT 29 March 2022 until 30 June 2023
A small business (with aggregated annual turnover of less than $50 million) will be able to deduct an additional 20 per cent of the expenditure incurred for the purposes of business digital operations or digitising its operations on business expenses and depreciating assets such as portable payment devices, 1 of 3 cyber security systems or subscriptions such as MYOB or Xero to cloud based services.
An annual $100,000 cap on expenditure will apply to each qualifying income year. Businesses can continue to deduct
expenditure over $100,000 under existing law. For eg suggest if purchase laptop that costs < $100k purchase
before 30 June 2023 to get additional 20% deduction.
Small Business Skills and Training Boost
A small businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia.
Small business energy incentive from 1 July 2023
This will provide businesses with an annual turnover of less than $50 million with an additional 20% deduction on spending that supports electrification and more efficient use of energy. Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
The measure will help small businesses make investments like:
• electrifying their heating and cooling systems
• upgrading to more efficient fridges and induction
• installing batteries and heat pumps.
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being
$20,000 per business.
First Home Super Saver Scheme
The FHSS Scheme allows you to save money for a first home inside your superannuation fund. The scheme provides concessional tax treatment within super.
From 1 July 2017 you can following voluntary contributions into your super fund to save for your first home:
- Concessional contributions – including salary sacrifice amounts or contributions for which a tax deduction has been claimed. These are taxed at 15%.
- Non-concessional contributions – these are made after tax or where a tax deduction has not been claimed.
To qualify you must:
- have not previously owned property in Australia (subject to exceptions)
- have not previously released FHSS funds
- either live or intend to live in the premises you are buying as soon as practicable
- intend to live in the property for at least six months of the first 12 months you own it, after it is practical to move in.
You can apply for the release of voluntary contributions up to a maximum of $15,000 from any one financial year and $50,000 in total across all years. You can contribute up to your existing superannuation contribution caps.
Contributing proceeds of downsizing into superannuation
From 1 July 2018, the Australian Government will introduce the Contributing the proceeds of downsizing into superannuation measure. This measure applies to the sale of your main residence, where the exchange of contracts for the sale occurs on or after 1 July 2018.
If you are 55 years old or over and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home. Your downsizer contribution will not count towards your contributions caps or be affected by the total superannuation balance test in the year you make it. However, it will count towards your total super balance and transfer balance cap, currently set at $1.7 million. This cap applies when you move your super savings into retirement phase. You can only make downsizing contributions for the sale of one home.
Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension.
Other eligibility criteria: –
- Your home was owned by you or your spouse for 10 years or more prior to the sale.
- You have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution.
- You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually the date of settlement.
Expanded access to small business concessions from 1 July 2016
From 1 July 2016, a range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold) (increased from $2 million). The turnover threshold stays at $2m for Capital Gains Tax Small Business concessions).
From 1 July 2020 small business taxpayers (ie turnover from $10 million to $50 million can claim deduction for payments in advance where less than $1,000, under contract for service (eg salary and wages), services received within 13 months.
Non-concessional contributions cap reduced from 1 July 2021 from $100,000 to $110,000 per year
Non-concessional (after-tax) contributions include:
- personal contributions for which you do not claim an income tax deduction, and
- spouse contributions.
Under Bring Forward rules, if you are aged under 75 years of age, you can bring forward total of 3 years non-concessional contributions in one year, and that translates into nonconcessional super contributions of $330,000 for the 2022/2023 year), before you would exceed the nonconcessional cap (if your total super balance on 30 June of the
previous financial year is less than $1.48 million). Caution required under bring forward rules required to ensure
do not exceed cap limits due to prior contributions.
Age restrictions on contributions lifted from the 2022-23 year. From 1 July 2022, access to the non-concessional contribution bring forward rule will extend to individuals who are age 74 or less on 1 July of a financial year.
From 2022–23 financial year onwards, your SMSF can accept non-mandated contributions for members under 75 years and there is no requirement to meet the work test.
Non-mandated contributions include:
- contributions made by employers over and above their super guarantee or award obligations (such as salary sacrifice contributions)
- member contributions ؎ these are contributions made by or on behalf of a member, such as
- personal contributions
- eligible proceeds from primary residence disposal (downsizer contribution)
- super co-contributions
- eligible spouse contributions
- contributions made by a third party, such as an insurer.
Therefore from 1 July 2022, taxpayer can make a non-mandated contribution if they are aged from 67 -74 without meeting the work test. In 2022, the work test had to be met for certain non-mandated contributions if the member was aged from 67-74.
A taxpayer will need to meet the work test to claim personal super contribution deductions (From 67 -74).
From 1 July 2021
The amount of the non-concessional contributions cap you can bring forward is either:
- three times the annual non-concessional contributions cap over three years (that is, $330,000) if your total super balance on 30 June of the previous financial year is less than $1.48 million
- two times the annual cap over two years (that is, $220,000) if your total super balance on 30 June of the previous financial year is above $1.48 million and less than $1.59 million
- nil ($0) if your total super balance is $1.59 million or above.
The remaining cap for years two or three of a bring forward arrangement is reduced to nil for a financial year if your total super balance is greater than or equal to the general transfer cap at the end of 30 June of the previous financial year. For eg if your super balance is $1.6million at 30 June 2021 you are not entitled to brought forward period for 2021-22 year as the non-concessional cap applies. The Superannuation general transfer balance cap increased from $1.6 million to $1.7 million on 1 July 2021.
If an individual starts to have their first retirement phase income stream on or after 1 July 2023 their personal transfer balance cap will be set at $1.9m. However if an individual started to have a transfer balance account before 1 July 2021, they will have a transfer balance cap between $1.6m and $1.7m. (which may be subject to proportional indexation on 1 July 2023 according to the “unused cap percentage” if they have not fully utilised their personal cap).
Therefore, if individual is thinking about starting retirement phase income stream they can put $200,000 more into tax-effective pension if they delay their pension from 1 July 2023 (cap $1.9m) than if they commence before then (cap $1.7m).
This measure may provide the opportunity for individuals to increase their superannuation savings into super which is a tax-effective environment.
This measure may also give individuals the opportunity to make their estate plans tax-effective if they expect their superannuation death benefit will be paid to adult children. By withdrawing monies from super and recontributing non-concessional contributions individuals may increase the tax-free component of their account. This may result in lower tax on death benefits.
Change to personal super contributions deductions from 1 July 2017 – $25,000 concessional contribution cap. From 1 July 2021 the cap increases to $27,500.
- These changes are for people who make personal super contributions from their income after tax (this does not include contributions made under a salary sacrifice arrangement and compulsory super paid by your employer), and
- want to claim a deduction for these contributions.
You can claim a deduction for personal super contributions made on or after 1 July 2017 if:
- you made the contribution to a complying super fund or a retirement savings account that is not a
- Commonwealth public sector superannuation scheme in which you have a defined benefit interest
- CPF or other untaxed fund that would not include your contribution in its assessable income
- Super fund that notified the ATO before the start of the income year that they elected to treat all member contributions to
- the super fund as non-deductible
- the defined benefit interest within the fund as non-deductible.
- you notify your fund in writing of the amount you intend to claim as a deduction
- your fund acknowledges your intent to claim a deduction in writing
- if you are 75 years old or older, you can only claim a deduction for contributions you made on or before the 28th day of the month following the month in which you turned 75.
Concessional contributions cap from 1 July 2021 cap increased to $27,500 from $25,000
Concessional (pre-tax) contributions to your super include:
- employer contributions
- any amount you salary sacrifice into super
- personal contributions you claim as a personal super contribution deduction
As concessional contributions are paid before tax is applied, it means that your super fund pays tax on the contributions at 15%.
From 1 July 2021 the cap is increased to $27,500 from $25,000..
The contributions that you claim as a deduction will count towards your concessional contributions cap. If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions.
If you have a year of substantial capital gain or income, you can claim concessional contribution against capital gain which will reduce income.
Carry-forward of unused concessional contributions
From 1 July 2018, you will be able to carry-forward any unused amount of your concessional contributions cap. You will be able to access your unused concessional contributions cap on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.
The first year in which you can access unused concessional contributions is 2019-20.
You will only be able to carry forward your unused concessional contributions cap if your total super balance at the end of 30 June of the previous financial year is less than $500,000.
Change to Division 293 income threshold from 1 July 2017
Currently, individuals with income and concessional super contributions greater than $250,000 will trigger a Division 293 assessment.
From 1 July 2017, the Division 293 income threshold decreased from $300,000 to $250,000. An individual with income, and concessional super contributions, exceeding the $250,000 threshold will have an additional 15% tax imposed on the lessor of: –
- the excess, or
- the concessional contributions (except excess contributions)
New transfer balance cap for retirement phase accounts from 1 July 2023. From 1 July 2023 cap the superannuation general transfer balance cap will increased from $1.7 million to $1.9 million.
A new transfer balance cap applies for people who are retired and have $1.7 million or more in their retirement phase super accounts.
The ‘transfer balance cap’ is a limit on how much of your super you can transfer from your accumulation super account(s) to tax-free retirement phase account(s) to receive your pension income.
The transfer balance cap started at $1.6million, and will be indexed in line with the consumer price index (CPI), rounded down to the nearest $100,000. From 1 July 2021 cap the superannuation general transfer balance cap increased from $1.6 million to $1.7 million. From 1 July 2023 the transfer balance cap will increase to $1.9m.
Small Business – Lodgment Penalty Amnesty Program
The amnesty applies to overdue income tax returns, business activity statements and fringe benefits tax returns that were due between 1 December 2019 and 28 February 2022. If eligible overdue forms are lodged between 1 June 2023 and 31 December 2023, any failure to lodge penalty applying to the late lodgment will be remitted. No action is required to request a remission.
To be eligible for the amnesty the small business must have had an annual turnover of less than $10 million at the time the original lodgment was due. This does not apply to privately owned groups, or individuals controlling over $5 million of net wealth.
Super Fund NALI to be capped at twice general expense under NALI/NALE rules
Non-arm’s length income (NALI) and expenses (NALE) rules will be amended so that income taxable as NALI will be limited to twice the level of a general expense for SMSFs and small APRA funds. For eg if Fund does not charge $1,500 NALE expense then $3k will be treated as NALI and taxed at higher rate.
Super tax changes for account balances above $3million from 1 July 2025 (not yet law)
The tax rate for superannuation fund earnings for individuals with account balances above $3m to increase to 30%. The 15% tax rate will continue for account balances below $3 million
With these Super changes – for balances below $1.9m, super is still tax-effective investment. The excess over $3m, Superannuation is not as tax-effective. Other investments may be more tax-effective for retirement planning for the balance over $3m