Practice Update - July 2022

Lowe Lippmann Chartered Accountants

Practice Update - July 2022

ATO’s small business focus for 2022 income year


The ATO announced that it will be focussing on the following matters for small business tax returns for the 2021/22 year:

  • Deductions that are private in nature and not related to business income, as well as overclaiming of business expenses (especially for taxpayers running a home-based business).
  • Omission of business income (ie. income from the sharing economy or new business ventures).
  • Record keeping – including insufficient or non-existent records that are needed to substantiate claims.


The ATO acknowledges that it has been a tough couple of years for many small business owners and encourages taxpayers to act early to find a solution if they are getting behind in their tax obligations, either by contacting their tax agent or the ATO.



ATO targeting SMSFs that fail to lodge annual returns


The ATO has observed an increase in the number of SMSFs that fail to lodge their first annual return and become what the ATO refers to as ‘NEVER’ lodgers. The ATO is particularly concerned where there has been a roll-over into these SMSFs, as this is a strong indicator illegal early release of superannuation benefits may have occurred.


A minority of SMSF trustees continue to ignore ATO reminders about lodging annual returns. This group is now being targeted with a compliance campaign the ATO calls ‘3 strikes and you’re out’.


Under this campaign, the ATO will take the following action:

  • The ATO’s compliance action starts with a blue letter, that encourages trustees to take immediate action and lodge their return and provides a pathway for those in need of support.
  • If the ATO does not receive a response to the blue letter, it will issue an amber letter warning the trustees of the consequences of failing to lodge their return.
  • If the ATO still does not receive a response, it will issue a final warning, a red letter advising the ATO is commencing the disqualification process and considering other enforcement action.


Last year the ATO issued red letters to trustees who had never lodged their first annual return and has now commenced disqualifying the 95 trustees that did not respond.



ATO updates ‘cents per kilometre’ rate for individuals


The ATO has updated the cents per kilometre rate relating to individual car expenses for the 2023 income year to 78 cents per business kilometre.


The cents per kilometre method:

  • uses a set rate for each kilometre travelled for business;
  • allows taxpayers to claim a maximum of 5,000 business kilometres per car, per year;
  • does not require written evidence to show exactly how many kilometres were travelled (but the ATO may ask taxpayers to show how they worked out their business kilometres, for example by means of diary records); and
  • uses a rate that takes all vehicle running expenses (including registration, fuel, servicing and insurance) and depreciation into account.


The cents per kilometre rate was 72 cents for the 2021 and 2022 income years.



ATO to target ‘wash sales’ this Tax Time


The ATO is warning taxpayers to not engage in ‘asset wash sales’ to artificially increase their losses to reduce gains (or expected gains). Wash sales are a form of tax avoidance that the ATO is focussed on this tax time.


Wash sales typically involve the disposal of assets (ie. cryptocurrency and shares) just before the end of the financial year, where after a short period of time, the taxpayer reacquires the same or substantially similar assets. Such sales are usually done to create a loss to be offset against a gain already derived, or expected to be derived, in certain circumstances, in a tax return.


The ATO’s sophisticated data analytics can identify wash sales through access to data from share registries and crypto asset exchanges. When the ATO identifies this behaviour, the capital loss is rejected, resulting in an even bigger loss to the taxpayer.


The ATO has warned taxpayers engaging in wash sales that they are at risk of facing swift compliance action and additional tax, interest and penalties may apply. Taxpayers are urged to ignore any advice encouraging a wash sale of any asset. The clear advice from the ATO is to check the ATO website or check with an independent registered tax professional and not to rely on advice received through media, social media, or advertisements.



Downsizer contributions age changes from 1 July 2022


From 1 July 2022, people aged 60 years and over will be eligible to make downsizer contributions of up to $300,000 per person ($600,000 per couple) from the sale proceeds of their home into their super. For downsizer contributions made prior to 1 July 2022, eligible individuals must have been aged 65 years or older at the time of making their contribution.


Eligible downsizer contributions do not impact or count towards the member’s concessional or non-concessional super contribution caps.


During the 2022 Federal election, the previous Coalition Government announced it would support a further reduction to the downsizer eligibility age to 55 years. However, this announcement has not become law. Accordingly, contributions received on or after 1 July 2022 from members who are 55 to 59 will:

  • be ineligible for treatment as downsizer contributions; and
  • generally count towards either the member’s non-concessional or concessional superannuation contributions caps.



Super guarantee contribution due date for June 2022 quarter


The due date for employers to make super guarantee contributions for their employees for the June 2022 quarter is 28 July 2022. Note that the super guarantee rate in relation to salary and wages paid on or before 30 June 2022 is 10%.


Employers that do not pay an employee’s superannuation guarantee amount on time (and to the right fund) are liable to pay the ‘superannuation guarantee charge’ (SGC). The SGC is more than the superannuation amount that is otherwise payable for the employee and is not tax deductible.


As we noted in our June Practice Update, the super guarantee rate increases to 10.5% in relation to salary and wages paid on or after 1 July 2022 (even if they are paid in relation to work performed before that date).


Note also, contributions received by superannuation funds after 30 June 2022 will not be deductible in the 2022 income year, even if they are made in relation to work performed during the 2022 income year.



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

FEDERAL BUDGET 2026-27

May 12, 2026
SUMMARY AND FULL COMMENTARY UPDATES 

Practice Update – May 2026

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.

Practice Update – April 2026

April 12, 2026
Know when a new logbook is required Keeping a car logbook may be required to accurately calculate the business-use percentage of vehicle expenses (ie. fuel, registration, insurance and depreciation) for tax deductions. Taxpayers can keep the same logbook for their car for five years, but there are circumstances where they may need a new one during that period. Relying on a logbook that no longer represents a client's work-related travel may result in them claiming more, or less, than they are entitled to. A new logbook may be required when a taxpayer: moves to a new house or workplace — updating their residential or work address may then be necessary; or has changes to their pattern of use of the car for work purposes — checking that they are still doing the same role and routine may then be necessary. Taxpayers using the logbook method for two or more cars need to keep a logbook for each car and make sure they cover the same period. Clients who purchase a new car during the income year and want to continue relying on their previous car's logbook must make a nomination in writing. The nomination must be made before they lodge their tax return and state: they are replacing their original car with a new car; and the date that nomination takes effect. Taxpayers should remember that, if their employer provides them with a car or they salary sacrifice a car using a novated lease, they are not entitled to claim work-related car expenses using the logbook or cents per kilometre method, as they do not own the car. When claiming car expenses using the logbook method, taxpayers also need to keep various types of other records, including (among other things) odometer records for the start and end of the period they own the car, proof of purchase price, decline in value calculations, and fuel and oil receipts (or records of a reasonable estimate of these expenses based on odometer readings).
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