Practice Update - December 2021

Lowe Lippmann Chartered Accountants

Tax Planning Tips For 2022


After the many challenges that businesses may have had to face as a result of COVID during 2021, business owners should be reviewing and measuring their performance in comparison to the previous year.  By regularly reviewing this information, a greater understanding of the basis for tax planning and budgeting can be determined more accurately. While tax planning is a process that should be continuously managed over the year for better and more adaptive results, it’s never too late to start.

 

This is especially relevant now as business owners need to understand the business’s current ability to move forward in the current economic circumstances and plan for the future.  Otherwise, past mistakes could be repeated in the future.

 

Here are some general tax tips that business owners can take with them into 2022.

 

Timing Of Expenses

An expense is an allowable deduction that is necessarily incurred in carrying on a business or for the purpose of gaining or producing assessable income.  Expenses should be recognised in the same period as the revenues to which they relate when it comes to lodging your tax.

 

Most prepayments that are made now are not deductible until the period to which they relate (though some exceptions may apply).  Small businesses and individuals may be able to deduct 12 months of prepayments in the year paid, as an expense.

 

Payments to Workers

Deductions on payments to workers (whether they are employees, contractors, directors, etc.) can only be claimed when the business has complied with their PAYG withholding and reporting obligations.

 

Family businesses or businesses that employ family members should be especially concerned with preparing for this, as they have additional obligations to ensure that they are correctly paying the right amount of tax.  If they have received wages, or been given allowances below the tax-free threshold, they will need to be registered as a withholder and a PAYG summary provided.

 

Your business should already be in the position to process payments through Single Touch Payroll, as it was made mandatory for all businesses to use from 1 July 2021.

 

Bad Debts

Conduct a review on the debts that may be affecting your business. If any of these are unlikely to be recovered, the best course may be to write them off as ‘bad’ prior to the end of the financial year. You can speak with us about this process to ensure that it is performed correctly (and that you are able to do so).

 

Writing off bad debts can reduce your income tax, and generate a GST refund.

 

Bonuses

With the holiday period approaching, businesses may be considering giving their staff a bonus. It is important to remember though that bonuses are only deductible when they are actually incurred.



Managing business cash flow


The ATO has issued a reminder to businesses that paying regular attention to their record-keeping and reporting tasks will help them better manage their cash flow and allow them to plan for the future.

 

The best way to make sure a business has enough cash available to meet its tax and other obligations is to do a cash flow budget or projection. This information will help the business to:


  • see its likely cash position at any time;
  • identify any fluctuations that may lead to potential cash shortages;
  • plan for tax payments;
  • plan for any major expenses; and
  • provide lenders with information.

 

Accounting for income and expenses can help keep a business running smoothly — by giving it an overview of when it can expect money to come in and when it may go out, and highlighting where the business may need to direct its money.

 

The ATO provides resources about record keeping for business, and there is also information on business.gov.au regarding how to create a budget, and how to improve a business's financial position.

 


Single Touch Payroll Phase 2 Deadline Approaches


The mandatory start date for businesses to be using STP software is fast approaching, and the ATO is urging businesses to ensure that they are meeting their obligations beforehand.

 

Phase 2 of Single Touch Payroll is expected to commence from 1 January 2022.

In this phase, additional information (including a breakdown of gross amounts and income types) will need to be reported to the ATO each payday.  It will subsequently be shared with Services Australia in an effort to reduce employers’ reporting obligations to multiple government agencies.

 

If the payroll solution that you use is ready by 1 January 2022, your business should start Phase 2 reporting. One important concession from the ATO is that your business will be considered to be reporting on time if Phase 2 is started before 1 March 2022.

 

If you require any assistance, please contact your Lowe Lippmann Relationship Partner.

 


Super is now following new employees


The ATO is reminding employers that, as of 1 November 2021, there is an extra step they may need to take to comply with the choice of super fund rules.

 

If a new employee does not choose a super fund, most employers will need to request the employee's 'stapled super fund' details from the ATO to avoid penalties.

 

A stapled super fund is an existing super account which is linked, or “stapled”, to an individual employee so that it follows them as they change jobs.

 

When a new employee starts, employers need to:

  • offer eligible employees a choice of super fund;
  • if the new employee does not choose a super fund, the employer will need to request stapled super fund details using Online services for business; and
  • pay super contributions into one of the following:

o  the super fund they choose;

o  the stapled super fund the ATO provides if they have not chosen a fund; or

o  the employer's default fund (or another fund that meets the choice of fund rules) if the employer cannot pay into the two above.



ABN “intent to cancel” program


The ATO is reviewing Australian business numbers (ABNs) to identify potentially inactive ABNs for cancellation, and it has introduced a new automated process to allow taxpayers (or their tax agents) to confirm if their ABN is still required via a secure voice response system.

 

An ABN may be selected if the taxpayer has not reported business activity in their tax return, or there are no signs of business activity in other lodgments or third-party information.

 

The ATO reminds taxpayers that any income earned under an ABN needs to be reported in their tax return, regardless of the amount. By keeping their tax obligations up to date, the ATO can see they are actively undertaking a business (so, therefore, their ABN should not be cancelled).



“Backpacker tax” may not apply to some backpackers


The High Court has held that the “working holiday maker tax” (also known as the “backpackers tax”) did not apply to a taxpayer on a working holiday visa from the United Kingdom who was also an Australian tax resident, due to the application of the Double Tax Agreement between Australia and the United Kingdom.

 

The ATO has responded to this High Court decision, noting that it is only relevant where a working holiday maker is both an Australian resident for tax purposes and from Chile, Finland, Japan, Norway, Turkey, the United Kingdom, Germany or Israel.

 

Working holiday makers who may potentially be affected by this decision are encouraged to check the ATO website for updated guidance prior to lodging or amending a return or lodging an objection.

 

Employers should continue to follow rates in the published withholding tables for working holiday makers until the ATO updates its website with further guidance.

 

The ATO notes that a working holiday maker’s residency status for tax purposes is determined by the taxpayer’s individual circumstances, but most working holiday makers will be non-residents (consistent with their purpose of being in Australia to have a holiday and working to support that holiday).



Beware of scams


Scamwatch is warning that scams cost Australian consumers, businesses and the economy hundreds of millions of dollars each year and cause serious emotional harm to victims and their families.

 

Cryptocurrency scams are the most 'popular' type of investment scams, representing over 50% of losses. Often the initial investment amount is low (between $250 and $500), but the scammers pressure the person to invest more over time before claiming the money is gone or ceasing communication and blocking access to the funds.

 

All age groups are losing money to investment scams, but the over-65s have lost the most, with $24 million lost this year.

 

Some simple steps individuals can take to protect themselves (and their businesses) are:

  • Never give any personal information to someone who has contacted you.
  • Hang up and verify the identity of the person contacting you by calling the relevant organisation directly — find them through an independent source such as a phone book, past bill or online search.
  • Do not click on hyperlinks in text/social media messages or emails, even if it appears to come from a trusted source.
  • Go directly to a website through a browser (e.g., to reach the MyGov website, type ‘my.gov.au’ into the browser).
  • Search for reviews before purchasing from unfamiliar online traders.
  • Be wary of sellers requesting unusual payment methods.
  • Verify any request to change bank details by contacting the supplier directly.
  • Consider a multi-factor approval process for transactions over a certain dollar amount.
  • Never provide a stranger remote access to your computer, even if they claim to be from a telco company such as Telstra.

 


Data-matching program: Services Australia benefits and entitlements


The ATO has advised it will acquire Medicare Exemption Statement (MES) data relating to approximately 100,000 individuals from Services Australia for the 2021 financial year through to the 2023 financial year inclusively, and compare it with claims made by taxpayers on their tax returns.





Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.




May 18, 2026
Planning for Superannuation Contributions before 30 June 2026 As the end of the financial year is approaching, we take this opportunity to remind you of the various superannuation thresholds, opportunities, obligations and changes, including topics such as:  Concessional contributions Non-concessional contributions Superannuation guarantee Impending changes to superannuation from 1 July 2026
May 12, 2026
SUMMARY AND FULL COMMENTARY UPDATES 
May 4, 2026
Special Topic: Payday Super changes apply from 1 July 2026, act now to be prepared! The ATO has issued further guidance on Payday Super changes that apply from 1 July 2026. In particular, the ATO released a ‘Payday Super checklist for Employers’ ( click here ), which is a good summary of the tasks that should be completed before 1 July 2026, and now is the time to act. Understanding ‘qualifying earnings’ From 1 July 2026, employers will calculate super using ‘qualifying earnings’ ( QE ) instead of the current ‘ordinary time earnings’ ( OTE ). For many employers, the new concept of QE is broader than OTE, but it should not change the amount they need to pay for their employees. However, it may require updates to payroll software configuration and reporting. Employers should review and prepare to correctly map pay codes now to meet reporting obligations and ensure readiness when their updated payroll software is available. QE include the following payments: OTE (ie. payments for ordinary hours of work), including certain types of paid leave, allowances, bonuses and lump sum payments. There are no changes to what payments are considered OTE under Payday Super. For a full list of payments which are included within OTE – click here . All commissions paid to an employee. Salary sacrifice amounts that would qualify as QE had they not been sacrificed to superannuation. Earnings paid to workers who fall under the expanded definition of employee, including payments to independent contractors paid mainly for their labour. Some payments may fall into more than one category of QE, such as commissions, and those payments are covered only once to the extent of the overlap in categories. The total QE for a pay period is determined by aggregating all qualifying payments made to or for an employee on the relevant day, forming the basis for calculating superannuation guarantee ( SG ) contributions. Each payday, employers will need to report both year-to-date QE and superannuation liability for each employee through Single Touch Payroll ( STP ). Employers should confirm their updated payroll software has this reporting functionality built in. Understanding new timing requirements for super contributions From 1 July, employers are responsible for ensuring that super contributions reach super funds within 7 business days of the relevant payday , calculated on the QE amount. Super funds will have 3 business days (down from 20 days) to allocate or return contributions that cannot be allocated. There is currently no obligation for the Super fund to confirm that an employee contribution has been allocated successfully, however if 3 days have elapsed we can accept that the employee contribution has been processed correctly. A super payment only counts once it is received by the employee’s superannuation fund, not when it is submitted. Submitting on day seven may not allow enough time, and we note there is no extension for rejected payments - so employers must ensure there is enough time to correct any errors and for SG contributions to reach funds within the 7 business days. Understanding importance of testing payroll software before 1 July 2026 Prepare now, review your payroll system readiness, engage with payroll software providers and ensure the functionality for these new changes will be supported. It has been widely suggested that new payroll software functionality is tested and everything is running smoothly before 1 July. Note that super payments for pay cycles in July 2026 may be due before your final quarterly super payment is due on 28 July 2026 (ie. for the June 2026 quarter, being April to June). Contributions received on or before 28 July 2026 will reduce any super owing for the June 2026 quarter first . If there is any remainder, contributions will then be used under Payday Super. If you pay on time for the June 2026 quarter and Payday Super you do not risk incurring penalties. The ATO has provided an example of this issue ( click here ), and explains that if the employer pays the correct amount for the June 2026 quarterly payments and the first Payday Super payment (ie. for the first pay cycle in July, which could be weekly or fortnightly) is paid in full both contributions will be made on time. Understanding cash flow pressure Employers may have multiple super payments due during July 2026, including: super payments for each Payday (after 1 July 2026); plus the final quarterly super payment due 28 July, for June 2026 quarter (ie. April to June). Employers should review their expected pay cycles for July 2026 to understand the impacts of paying super each payday after 1 July 2026. Employers may consider setting aside additional funds to make sure they can meet their obligations. If cashflow permits, employers can pay the June 2026 quarter super on or before the first payday in July (ie. the first pay cycle in July, which could be weekly or fortnightly). If an employer can do this, your business will have: a more seamless changeover to the Payday Super system; and time to correct any rejected payments before the 28 July deadline. We recommend that all employers take actions as soon as possible to be best prepared for the Payday Super changes coming in from 1 July 2026. If you require assistance, please contact your Lowe Lippmann representative.
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