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.

Audit Lowe Down – Costs incurred in acquiring / forming a business

September 9, 2025
Costs incurred in acquiring / forming a business. Further to the recent blog about capitalisation of costs when acquiring an asset, we have received a number of questions in relation to costs incurred in setting up / purchasing a business. Formation costs on establishing a business: These costs would include: Incorporation fees ASIC registration fees Legal fees Business name registration Pre-operating costs Pre-opening costs. The relevant standard for these costs is AASB 138 Intangible Assets and paragraph 69a confirms that these start-up costs are expensed when incurred. There is no identifiable asset controlled by the entity when the costs are incurred as the entity does not exist. Business acquisition costs These costs would include: Legal and accounting fees Due diligence and valuation costs Stamp duty Advisory or brokerage fees Project management costs related to the acquisition Internal costs allocated to the transaction In contrast to the asset acquisition discussed previously, AASB 3 Business Combinations requires all acquisition costs to be expensed as incurred. This means that they are not included as part of the consideration paid and therefore do not affect calculated goodwill.  Entities purchasing businesses should be aware that these costs are not able to be capitalised as they can often be substantial, and purchasers often do not expect the costs to be taken directly to the income statement

Practice Update – September 2025

September 8, 2025
ATO to include tax 'debts on hold' in taxpayer account balances From August 2025, the Australian Taxation Office ( ATO ) is progressively including 'debts on hold' in relevant taxpayer ATO account balances. A 'debt on hold' is an outstanding tax debt where the ATO has previously paused debt collection actions. Tax debts will generally be placed on hold where the ATO decides it is not cost effective to collect the debt at the time. The ATO is currently required by law to offset such 'debts on hold' against any refunds or credits the taxpayer is entitled to. The difficulty with these debts is that the ATO has not traditionally recorded them on taxpayer's ATO account balances. Taxpayers with 'debts on hold' of $100 or more will receive (or their tax agent will receive) a letter before it is added to their ATO account balance (which can be viewed in the ATO's online services or the statement of account). Taxpayers with a 'debt on hold' of less than $100 will not receive a letter, but the debt will be included in their ATO account balance. The ATO has advised it will remit the general interest charge ( GIC ) that is applied to 'debts on hold' for periods where they have not been included in account balances. This means that taxpayers have not been charged GIC for this period. The ATO will stop remitting GIC six months from the day the taxpayer's 'debt on hold' is included in their account balance. After this, GIC will start to apply.

Audit Lowe Down – How do we account for the costs incurred when acquiring an asset?

August 26, 2025
How do we account for the costs incurred when acquiring an asset? When we acquire an asset such as property, plant and equipment, intangibles or inventory there are often significant other costs incurred as part of the purchase process, including delivery, stamp duty, installation fees. Whether we capitalise these to the value of the asset or expense them as incurred can make a significant difference to an entity’s reported position or performance. Since we have accounting standards for specific assets, the treatment can vary depending on the asset and the relevant standard. A summary of some common expenses and their treatment under four accounting standards has been included below. The four standards considered are: AASB 102 Inventories AASB 116 Property, Plant and Equipment AASB 138 Intangible Assets AASB 140 Investment Property.
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