Updare for Westpac June 2022

Update for Westpac
June 2022

1300 236 853 (1300 BENTLEYS)
bentleys.com.au

Contents

Labor finally secures a win 03

New Federal Government 04

Your End of Financial Year Guide for FY 22 05

Introduction 05

EOFY for businesses 07

Business 08

Individual year end tax planning 15

Individuals 16

Reference 16

Leadership team 17

Bentleys Network tax experts 18

Disclaimer 19

EOFY planning manual FY2021/22 page 2

Labor finally secures a win

• The proposed scheme will be capped
to 10,000 places availble annually and
a total of 60,000 places over the life of
the scheme

• The Government will take a share of the
profit if the property is sold

Help to Buy is estimated to cost around
$329 million over the forward estimates.

Labor finally secures a majority • The deposit would be 5% generally but Tax policy
government - will housing become 2% for single parents
more affordable and where is tax policy In terms of tax policy, it would be fair to say
headed? • The Government underwrites the loan that the “tax goal posts”have, at this stage,
(otherwise which Lenders Mortgage not changed significantly. However, a new
Labor is our newly appointed Federal Insurance would be required where the Government creates some uncertainty in
Government, and has the 76 seats required deposit is less than 20%) terms of whether proposed tax changes
to form majority government in the lower previously announced will proceed.
house, but will still need to work with the • Housing price limits will be capped
crossbench to pass legislation through the depending on where the house Investors and retirees should take comfort
senate. is bought. For NSW, Sydney and that her appears to be no plans to revisit
regional centres will have a higher cap negative gearing, the capital gains discount,
The new Government has inherited a ($900,000 from 1 July) compared to or changes to superannuation. Further,
significant budget deficit of over $1 trillion other parts of the state ($750,000 from the already legislated “Stage 3”tax cuts for
and has already announced a line-by-line 1 July) individuals effective from 1 July 2024 will
budget review. This includes cancellation still proceed as planned. For businesses,
or deferral of significant capital-intensive In addition to the above, Labor will also the temporary full expensing of depreciable
projects. introduce its Help to Buy scheme, the key assets and loss carry back measures will
features of which are proposed to be as continue to operate until 30 June 2023.
Dealing with housing costs follows:
Labor has made known that it plans to
A key issue for the new Government to deal • A minimum deposit 2% would be focus on tax avoidance. This includes
with is housing affordability with national required supporting OECD reforms that target
housing prices increasing over 20% during multinationals and improving transparency.
the past year. Labor has reported that 40 • The program woud be aimed at first Labor has forecasted these measures will
years ago, approximately 60% of young home buyers for individuals earning up raise $5 billion in additional revenue over a
Australians on low to modest incomes to $90,000 and coupes earning up to four-year period. The additional revenue will
owned their own home compared now to a $120,000 no doubt be used to help fund its spending
28% ownership rate . initiatives. The bulk of this spending appears
• To help fund the purchase and avoid to relate to childcare subsidies ($5.4 billion)
Labor has indicated that it will retain the the Lenders Mortgage Insurance, the and aged care services ($2.5 billion) over its
former Morrison Government’s Home Government would take an equity stake four-year projections.
Guarantee Scheme the key features of of up to 30% for existing homes and
which were: 40% for new homes Crackdown on tax avoidance and
multinationals
• Lowering the deposit for first home • The homeowner would pay rent on the
buyers earning no more than $125,000 Government equity portion of the home Multinationals continue to be in the
for singles and $200,000 for couples to spotlight. The new Government announced
buy a home to live in • The property prices that the first home four main initiatives to start no earlier than
buyers can buy will also be capped 2023:

1. Adoption of the OECD’s proposal of
15% minimum global tax rate

2. Limiting debt deductions that can be
claimed by multinationals capped at
30% of profit while maintaining the
arm’s length debt test and worldwide
gearing ratio

EOFY planning manual FY2021/22 page 3

New Federal Government - Have the tax goal posts moved

3. Restricting tax deductions where intel- Tax measures in limbo • 30% digital games tax offset - this
lectural property is held in a tax haven incentive was to provide a 30% refund-
The change in Government also means able tax offset for eligible businesses
4. Introduction of transparency measures that there is now uncertainty in relation to that spend a minimum of $500,000 on
including beneficial ownership the former Government’s tax proposals in qualifying Australian games expenditure
disclosures, public disclosure of the following areas (most of which relate to
Country-by-Country reporting data and announcements in the recent FY22 Federal Whether the above proposals by the forner
additional tax disclosures for Budget): Government will see the light of day remains
Governement tenders. to be seen.
• Tax residency individuals - the pro-
Bentleys expect that many multinationals will posed introduction of a 183 day “bright Unanswered questions
be closely monitoring these developments. line” test to determine the tax residency
For example, high asset value, low income status of individuals There are also many other unanswered
businesses may be adversely impacted by questions, such as:
the proposed debt deduction measures. • Tax residency corporates - limiting
Businesses will need to ensure that they instances when a foreign incorporated • Will we see any new tax revenue raising
have adequate tax governance and tax risk company would be deemed an Austral- measures to fund childcare, aged care
mitigation measures in place to deal with the ian tax resident by modifying the central and other spending inititives?
changes. management and control test
• Will Green and “Teal Independent”
Tax incentives for electric cars • Tax residency of SMSFs - this climate policies influence tax policy?
measure was intended to extend safe
Apart from the crackdown on multinationals, harbour measures from 2 to 5 years • How will inflationary impacts in the
the only other main tax policy that has been for SMSFs in respect of members that economy be managed by tax policy?
announced relates to a proposed Fringe were undertaking overseas work and
Benefits Tax (FBT) and tariff exemption for education opportunities We expect the Government’s Federal
electric vehicles below the luxury car tax Budget to be released in October this year
threshold (currently $79,659). • Patent box regime - This incentive will shed further light on these questions.
The concession is proposed to start from 1 was aimed to tax corporate income de- We will all be waiting to see the extent to
July 2022 and will be reviewed after 3 years rived from eligible Australian patents in which the “tax goal posts” will be shifting.
having regard to the level of electric car the medical and biotechnology sectors,
adoption during that period. at a concessional rate of 17%.

We expect this to generate a great deal of • 20% small business boost - This
interest for employees and employers in incentive was to provide SMEs
terms of FBT and salary packaging. This will (aggregated turnover under $50m) with
be subject of course to seeing the detail and an additional 20% deduction on tech-
mechanics of how the proposed concession nology and related training spending
is to operate. and initiatives

EOFY planning manual FY2021/22 page 4

1. End of financial year planning manual FY 2022/22 - Introduction

2022 has seen may of us coming out of the back-end of COVID-19 with State
governments continuing to offer financial support for extended lockdowns during the
period.

This support may or may not be taxable, so it is important that you review the types of
amounts you have received during the year, and plan properly to mitigate tax impacts on the
year-end results.

Your Bentleys advisor can help you step through the different opportunities, how they
should be implemented in your group and the future tax cashflow consequences from
adopting the strategies.

The top-10 year-end planning issues business should pay particular attention to:

Year-end issue Action
1. Asset write-off and asset registers Maximise deductions through temporary asset write-offs.

2. Prepayment for <$50m turnover Consider prepaying expenses to defer income.
businesses

3. Trust distributions and company dividends Ensure trust distributions and dividend payments are tax effective given ATO releases.

4. Employee superannuation and incentive Manage the increase in Super Guarantee Contribution (SGC) rate to 10.5%. Pay year-
arrangements end super contributions, and lock-in employee incentive payments.

5. Grouping losses and profits Consider grouping of losses and profits within family groups to access the lower
company tax rate of 25%.

6. Personal service income Review personal service income distributions within a group in line with new ATO
guidance.

7. Losses and company loss carry-back Ensure losses are available and company loss carry-back can be accessed.

8. Research and development Ensure R&D claims are properly documented.

9. Non-deductibility of ‘non-ABN’ payments Ensure ABNs have been received for contractors paid.
10. Private company loan compliance Make sure minimum repayments are made.

In this document, we set out these and other suitable responses to key tax planning issues
for FY2021/22, for your consideration.

EOFY planning manual FY2021/22 page 5

The purpose of this 1. Introduction 05 2.4.4 Trust deeds and trust compliance
section is to help 2.4.5 Tax governance / ATO review
businesses and 2. Business 07
individuals with preparation
their year-end tax 2.1 Actions pre 30 June 2022 07 2.4.6 Aggregated turnover testing
planning for the 2.4.7 Private company loans
financial year of 2.1.1 Asset acquisitions 2.4.8 Personal service income / contractor
2021/22.
2.1.2 Expense prepayments documentation
We outline the 2.4.9 Employee share plans
key issues and 2.1.3 Bad debt write-offs 2.4.10 Inter-entity agreements / minutes
recommend actions 2.4.11 Not-for-profit tax exemptions
to help you and your 2.1.4 Trust resolutions
business get where
you want to be. 2.1.5 Dividend payments 2.5 International issues 14
2.5.1 Withholding taxes
Please contact 2.1.6 Private company loan compliance 2.5.2 Anti-hybrid rules
your local Bentleys 2.5.3 Transfer pricing
advisor for 2.1.7 Employee bonuses 2.5.4 Thin capitalisation
assistance. 2.5.5 Permanent establishment
2.1.8 Employee superannuation

2.1.9 Employee super packaging

2.1.10 Foreign exchange realisations

2.1.11 Asset loss realisations

2.1.12 Inter-entity transactions (profit and

loss planning) 3. Individuals 15

2.1.13 Personal service income review

and strategy

2.1.14 PAF contributions and distributions 3.1 Actions pre 30 June 2022 12
3.1.1 Superannuation contributions
2.1.15 Farm management deposits 3.1.2 Asset realisation - contract date
3.1.3 Donations
2.2 Actions post 30 June 2022 09 3.1.4 Prepayments
2.2.1 Early stage innovation company 3.1.5 Asset write-offs

notifications 3.2 Other planning issues 12
2.2.2 New beneficiary TFN notifications
2.2.3 Tax instalment notifications 3.2.1 Vary PAYG instalments
2.2.4 Contractor reporting

3.2.2 Working from home deductions

2.3 Other year-end planning points 10 3.2.3 Vehicles and log books
2.3.1 Stock valuations
2.3.2 Asset write-off choices 3.2.4 Travel expenses
2.3.3 Company loan carry-back review
2.3.4 Lease incentives 3.2.5 Private health insurance
2.3.5 Quantity surveyor reports
2.3.6 Treatment of government grants and 3.2.6 Rental property depreciation

concessions 3.2.7 Rental property expenses - interest
2.3.7 Deductible accruals
2.3.8 Withholding taxes - black economy 3.2.8 Rental property expenses - no ABN
2.3.9 Employee versus contractor
2.3.10 Company tax rate / change 3.2.9 Crypto-currencies
2.3.11 Financial reporting
2.3.12 Revenue versus capital treatment of 4. References 16
receipts
2.3.13 Additional 20% deduction for IT and 5. Leadership team 17
training costs
6. Tax experts 18

2.4 2022 housekeeping and 12 7. Disclaimer 19
documentation issues

2.4.1 Tax asset registers
2.4.2 Reportable tax positions
2.4.3 Research and development

2. Business year-end tax planning

You need to plan properly 2.1 Actions that should occur before Where you are not able to show evidence
to mitigate tax impacts on 30 June 2022 of recovery, it may be possible to determine
the year-end results. that the debt was doubtful when raised
Your Bentleys advisor can 2.1.1 Asset acquisitions such that the income should not have
help you step through the been accrued. This will depend on the
different opportunities, Depreciating asset acquisitions which are circumstances of each case.
how they should be installed ready for use (generally delivered
implemented in your rather than merely ordered) prior to 30 June You may also request a refund of GST paid
group, and the future tax 2022 may be fully deductible in this financial on the debt on the June BAS.
cashflow consequences year under asset write-off concessions.
from adopting the Certain agri assets (e.g. fodder storage) may 2.1.4 Trust resolutions
strategies. be deducted before they are installed. The
concessional full expensing provisions apply Each trust deed will be different in its
until 30 June 2023. Therefore, where you requirements for making a resolution.
have long lead-time asset acquisitions you However, generally a trustee must have at
should start planning now to make sure they least considered and resolved to distribute
are installed before this time. income to particular beneficiaries prior to
30 June 2022 for the distributions to be
You should be acquiring assets in the right effective. This may be documented at a
entities to achieve the best tax advantage. later date in accordance with the trust deed.
There are several points to consider:
Best practice is to document a trustee
• where you incur a loss from the asset resolution prior to 30 June 2022.
write-off in a trust, it may impact the Distributions don’t need to be paid in cash
ability to distribute franking credits from to be effective.
the trust. You may need to consider a
strategy to distribute additional income You should plan to make sure that trust
or dividends to the trust to use up distributions are determined in a tax-
the loss and be able to distribute the effective manner.
franking credits;
• the ATO considers the beneficiary must
• where you incur a loss from the asset be in a position to receive the benefit
write-off in a company you may be able of the distribution for the distribution to
to access the loss carry-back to get a be effective. The ATO may challenge
refund of prior year company tax paid. distributions which are solely tax driven
where the beneficiaries do not or are
2.1.2 Expense prepayments not intended to receive the distribution.
The ATO has release a draft risk-
‘Business’ prepayments are deductible to rating document which sets out which
businesses with an aggregated turnover less distribution strategies may attract their
than $50m. Therefore, where you prepay up attention;
to 12 months in advance for annual expenses
(e.g. insurance, loan interest) before 30 June • where trust income relates to a
2022 you may get a full tax deduction. professional practice distribution,
the ATO has released a risk rating
Where the business exceeds $50m document which considers the risk of
turnover, there may be certain prepayment ATO attention where distributions are
opportunities available where properly not made to the professional individual;
structured (e.g. prepaying rural products for
an agri operation1). • children who have turned 18 prior to
30 June 2022 may receive a higher
2.1.3 Bad debt write-offs distribution without penalty tax rates
applying;
A debt will generally need to be considered
‘bad’ before it can be written-off and
deducted. You need to document that you
have taken action to recover the debt to
conclude it is reasonable the debt will not
be recovered prior to 30 June 2022. You
generally don’t need to have commenced
legal actions.

EOFY planning manual FY2021/22 page 7

Business

• certain special needs children may be Please contact your Bentleys advisor to 2.1.9 Employee super packaging
entitled to receive a higher distribution determine the appropriate repayment
without penalty rates applying; strategy for your loans. The superannuation guarantee percentage
is increasing to 10.5% from 1 July 2022.
• use streaming provisions to stream 2.1.7 Employee bonuses Employers should make sure they review
franked dividends and capital gains to employee contracts to determine whether
entities which will benefit from these An employer must be definitely committed the employee is remunerated on a
types of income; to pay a bonus to an employee as at 30 superannuation inclusive or exclusive basis
June 2022 to be entitled to an income and whether the additional cost will be
• it may be effective to distributing tax deduction. The deduction may be passed on to the employee.
income to entities with tax losses available even though the employer may
(subject to managing specific anti- not have paid the bonus by 30 June 2022 2.1.10 Foreign exchange realisations
avoidance provisions). or completed the financials to be able to
determine whether the metrics were met. Foreign exchange rates during the COVID
2.1.5 Dividend payments Generally, the bonus calculation should period fluctuated greatly with different
be documented in a contract or director’s countries. Generally foreign exchange gains
A dividend will generally need to be ‘paid’ resolution prior to 30 June 2022 to meet the and losses are only taxed when realised.
prior to 30 June 2022 to fall within the 30 ‘definitely committed’ test. The employee Where you have large unrealised foreign
June 2022 financial year. You also need to will generally only be taxable on the bonus in exchange losses (e.g. foreign currency
ensure there are sufficient franking credits. the year of receipt. denominated loans or bank accounts) you
may need to take action prior to 30 June
We can assist you to review and document 2.1.8 Employee superannuation 2022 to see if an unrealised loss can be
tax effective dividend payments. Dividend realised.
payments may impact things like the Superannuation expenses are generally only
company loss carry-back. Therefore, deductible where the amount has been paid 2.1.11 Asset loss realisations
you should seek advice in relation to your and received by the superannuation fund
dividend strategy. prior to 30 June 2022. Where you have made capital gains during
the year it will be worth considering whether
2.1.6 Private company loan compliance Superannuation contributions are generally there are realised capital losses which may
taxed in the fund at 15%. Where the be brought to account to offset these gains.
Where you have existing private company business taxable income is otherwise We note there are various anti-avoidance
loan agreements in place (Division 7A) you reduced or in a loss position such that provisions which impact this strategy so you
will need to ensure that minimum statutory the business tax rate is low, additional should seek advice whether the losses are
repayments are made prior to 30 June 2022 superannuation contributions may not tax available.
to avoid adverse tax consequences. effective.

There are various methods available to
evidence a repayment of a loan which do
not necessarily require a cash payment.

EOFY planning manual FY2021/22 page 8

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2.1.12 Inter-entity transactions (profit and We note there is not necessarily any You need to make sure you have made the
loss planning) legislative basis for the ATO position. appropriate disclosures electronically with
However, you need to consider whether the ATO by 31 July 2022.
The tax results of different entities in groups your risk profile includes taking a position
may be different. You should undertake a which may be subject to ATO scrutiny. You may also be entitled to Research and
review prior to 30 June 2022 to determine Development tax concessions, employee
whether profits and losses in group entities 2.1.14 PAF contributions and equity concessions and other government
can effectively be offset against each other. distributions funding. We recommend you discuss these
The new loss carry-back may also be with your Bentleys advisor to make sure you
available. You may need to review inter- Where you have established a ‘Private are maximising your entitlements for you,
entity pricing arrangements and distribution Ancillary Fund’ for receiving and making your investors and your employees.
arrangements to ensure you achieve the deductible donations to manage your
most tax effective result. We can assist with business gift programs you should ensure 2.2.2 New beneficiary TFN notifications
this review. deductible contributions are made prior
to 30 June 2022 and minimum mandated Where you have added new beneficiaries of
2.1.13 Personal service income review levels of donations are made from the fund. trusts for the 30 June 2022 you will need to
and strategy notify the ATO with a TFN declaration by 31
2.1.15 Farm management deposits July 2022.
The ATO has further updated guidance
in relation to the tax treatment of income Farm Management Deposits (FMDs) may be 2.2.3 Tax instalment modifications
from personal services and professional assessable income when withdrawn. Given
practices. tax losses available for assets, now might Where you have completed your tax
be the time to consider redeploying FMDs estimates and you have overpaid tax
The ATO has set new acceptable ‘risk’ into productive capital investment where the instalments you should look to vary
levels where personal service income net cost of the withdrawal may be low or tax your final instalment in line with your tax
is ‘alienated’ to an entity other than the neutral. estimates. This should be done by the
individual connected with the income lodgement date of the June 2022 BAS.
earning activities. 2.2 Actions that should occur shortly
after 30 June 2022
Where you operate in a professional practice
business or operation we recommend you 2.2.1 Early stage innovation company
review your salary and distribution policies notifications
according to acceptable ATO risk levels2.
Where you operate a start-up innovation
company and you have completed a capital
raise during the 30 June 2022 financial year
you may be able to have your investors
access certain tax concessions.

EOFY planning manual FY2021/22 page 9

Business

2.2.4 Contractor reporting There are also other costs which may be 2.3.4 Lease Incentives
excluded from the tax value of stock on
The ATO requires reporting of payments hand at year-end. Temporary asset write-offs add a new
made to contractors in the following opportunity to structuring lease incentives
industries: Where you account for Work in Progress as for tenants. Where you are looking to offer
part of long-term construction contracts, your tenants lease incentives you should
• building and construction there are different tax accounting methods discuss how to structure the arrangement to
• cleaning services which may provide more favourable after-tax benefit both the landlord and tenant.
• courier services and road freight outcomes. We can assist with this review.
2.3.5 Quantity Surveryor reports
services 2.3.2 Asset write-off choices
• information technology services Where you acquire new or own existing
A business may choose that the temporary property you may be able to access
• security, investigation or surveillance full expensing rule (Div 40-BB) does not increased deductions for prior year capital
services apply for an asset. It may choose to do this spend in relation to the property. In
where tax losses created may not be able particular:
The report is due by 28 August 2022. to be used in future or when it could cause
an issue with a future sale of a company. A • building costs incurred by the previous
2.3 Other year-end planning points business can also choose not to elect into owner may continue to be deductible
the small business depreciation rules. over a statutory period; and
2.3.1 Stock valuations
There are three different methods for You should talk to your Bentleys advisor • part of your acquisition cost may be
calculating the tax value of stock on hand at to consider which asset choices are attributed to ‘depreciable’ fitout such as
year-end: appropriate for your business. air-conditioners. You may be entitled to
access the temporary asset write-offs
• cost 2.3.3 Company loss carry-back in relation to these amounts (subject to
meeting conditions).
• market selling value The loss carry-back measures apply to
companies to use current year losses to Likewise, where a tenant moves out of
• replacement value obtain a refund of taxes paid in prior years, your property and leaves a fit-out in place
as per the diagram above. you may potentially be able to continue to
You will generally get the best tax outcomes depreciate some of their fit-out you acquire
from choosing the lowest value. You should talk to your Bentleys advisor under the capital works provisions. A
to see if the tax loss carry-back may be Quantity Surveyor can estimate the costs
Where stock has become obsolete you may available for your company. This may also associated with the construction.
also write-down the value of the stock. It is impact the decision in which entity you
therefore important that you do a stocktake acquire new assets to generate tax losses
at year-end to determine the value of stock before 30 June 2022.
on hand from a tax perspective.

Stock which is consumed in the activities
(e.g. Fuel & Oil) is generally deductible when
incurred.

EOFY planning manual FY2021/22 page 10

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2.3.6 Treatment of government grants In these cases you may have a withholding • determining the character of income
and concessions tax obligation. If you did not comply with within company groups as ‘active’ or
this obligation you are unable to claim an ‘passive’ and which tax rate applies.
Government COVID and other relief income tax deduction for the expense. For example, income of an internal
concessions have different tax treatments. asset leasing entity is likely passive;
Certain government grants have specifically 2.3.9 Employee versus contractor
been designated as tax exempt. • managing trust distributions to
The ATO continues to consider the companies to ensure the 80% passive
Other grants may only be assessable at a treatment of employees v contractors and income test is not breached; and
later time or when conditions attached to this has been the subject of a number of
the grant are met. We can assist you to recent court decisions. In particular, this • quarantining frankable profits at the
review the treatment of grants with your distinction impacts whether superannuation 30% tax rate.
income tax compliance. guarantee amounts and on-costs are
payable on contractor payments. The State We can assist you with strategies to help
2.3.7 Deductible accruals Revenue Offices are now receiving this access the lower company tax rate and,
information and using it to determine other where possible, preserve entitlement to
Expenses will generally be deductible tax compliance such as payroll tax is being pay dividends to shareholders at the higher
when you are ‘definitely committed’ to the maintained. franking rate.
outgoing rather than when you receive or
pay an invoice for the work. You should pay You should ensure your systems and 2.3.11 Financial Reporting
close attention to: processes for determining the classification
• loan interest accruals; and is appropriate. You should discuss the scope of the
financial accounts preparation with your
• where work has been completed but 2.3.10 Company Tax Rate/ change Bentleys advisor and the degree to which
not yet invoiced to you normal accounting principles and standards
The Base Rate Entity company tax rate is need to be adopted for this financial
These costs may be deductible in the year 25% compared to the ordinary company tax year-end for the users of your financial
of accrual. rate of 30% for the FY2022 financial year. statements. The preparation of your
There are several ongoing planning points in financial statements may impact tax issues
2.3.8 Withholding taxes - black economy relation to the lower company tax rate: such as:

Effective from the start of the 2020 financial • determining whether the company is • whether the company is able to declare
year, costs are no longer deductible where under the $50m aggregated turnover a dividend out of available profits; or
withholding tax requirements have not been test and able to access the lower
met. A key area where this may occur is company tax rate; • whether the company has a
where you have paid consultants who have ‘distributable surplus’ under the private
not quoted you their ABN. company loan rules.

EOFY planning manual FY2021/22 page 11

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2.3.12 Revenue versus capital treatment You should also ensure that your • the income definition is sufficiently
of reciepts procedures for adding new assets are flexible to define income in line with tax
reviewed to ensure the correct information is concepts or other amounts to ensure
You may achieve significant tax advantages entered by your accounting staff. distributions are tax effective;
from classifying a receipt as ‘capital’ rather
than ‘revenue’. Where you have received 2.4.2 Reportable tax positions • the trusts achieve asset protection and
amounts outside the ordinary course of your estate planning objectives of the group;
business (e.g. from asset sales) you should Companies with total business income
discuss with us the appropriate treatment exceeding $250m or greater than $25m • family trust elections have been
and whether there is a benefit from forming (and part of an economic group with reviewed and made where necessary;
a view the amount is capital. more than $250m total business income)
are required to prepare a reportable tax • where the trust owns properties in
An example is certain mining compensation positions schedule for the year ended 30 certain States (e.g. NSW) the deed is
receipts received by agricultural land June 2022. This schedule requires a more drafted appropriately to avoid higher
owners. In the right circumstances these detailed review in relation to prior period tax tax state tax charges relating to non-
may be non-taxable reductions in the cost positions adopted to be able to correctly residents; and
of the land. answer the questions.
• proper minutes of meetings for trustee
2.3.13 Additional 20% deduction for We can assist with this review and in resolutions are retained with tax
digital adoption preparing the schedule. documentation.

The last Federal Budget has proposed 2.4.3 Research and development It is good governance practice to have
an additional 20 percent deduction for a rolling review of trust and corporate
small businesses (with aggregated annual Documentation of your eligible R&D is compliance documentation (e.g. every
turnover of less than $50 million) in respect becoming more and more important as three years) to ensure currency of the
of expenditure that support digital adoption the ATO increases its focus on excessive documentation.
initiatives into their business, such as claims. The current ATO areas of focus are:
portable payment devices, cyber security 2.4.5 Tax governance / ATO review
systems or subscriptions to cloud based • expenditure not ‘at risk’ (such as preparation
services. expenditure which is recovered from
another entity); and The ATO is currently undertaking their
However, as the Federal Government ‘Next 5000 reviews’ relating to higher
is currently in caretaker mode given the • the R&D treatment of expenditure with wealth groups (>$50m). This may also
current Federal election, you should speak associates. be extended to lower wealth groups. The
to your Bentleys advisor if you wish to aim is to get broad coverage across this
consider this proposed incentive. Please contact our R&D advisors if you client population. Higher Wealth groups
have any questions in relation to the level of can expect a review over the next couple of
2.4 2022 housekeeping and documentation you need to keep to ensure years. There are several critical items you
documentation issues you can maintain your eligible R&D claim. need to have in place as part of this review:

2.4.1 Tax asset registers 2.4.4 Trust deeds and trust compliance • a current group structure diagram
with up to date corporate and owner
Temporary asset write-offs and the Various State tax measures and changes to information;
interaction with future transactions means vesting conditions for trusts and changes
that you need to clearly identify on the tax to income streaming provisions mean that • documentation relating to tax risks
asset register the specific provision you are existing trust deeds may become out of within your group and the processes
using to depreciate or write-off the asset. In date. Where you have trusts in your group and procedures in place to manage
particular, it is important to identify whether: you should ensure: and communicate tax risk. We strongly
recommend as part of each annual
• the small business depreciation and • the class of beneficiaries is broad compliance engagement you undertake
write-off provisions in Division 328-D; enough to capture all desired with us we provide you with a written
distributions within the group; communication in relation to the
• the ordinary depreciation rules; material tax positions the group adopts
• the vesting date of the trust has not in each year and our assessment
• the Instant Asset Write-off in section passed or is not due soon and you are of the risk of the positions. This will
40-82; or aware when it will occur; form a key part of your governance
documentation; and
• the temporary asset write-offs in • the vesting date of the trust is not
Division 40-BA and 40-BB have been inconsistent with other trusts in the • consideration of, and documentation
applied to each asset. group such that it impacts intra-group relating to, each key risk area the ATO
distributions; has identified in relation to private
groups3.

EOFY planning manual FY2021/22 page 12

Business

We recommend, if you are within the Therefore, this is a rolling test which needs This applies equally for services provided
target group for this review, you consider to be continually monitored. between related parties.
engaging your Bentleys advisor to prepare
additional documentation as part of the 2022 2.4.7 Private company loans We can help you put in place
compliance preparation. This should be in line documentation which supports compliance
with ATO expectations of a Next 5000 review The private company loan rules are complex with this test.
to ensure you are ready to respond quickly. to administer in private groups and require
careful consideration and documentation of: 2.4.9 Employee Share Plans
We generally find that clients who are
well prepared and respond quickly and in • compliant loans under written loan Effective remuneration strategies for key
detail to an ATO request will move faster to agreements; employees can include sharing in the equity
finalisation without a costly detailed review. of the business. It is critical that these types
• effective repayment of loans; and of arrangements are properly documented
2.4.6 Aggregated turnover testing in compliance with the tax rules to be
• analysis of flow-on issues with group effective for the company and the employee.
Many of the tax concessions available are distributions. This may also require making sure that
based on a common definition of group tax compliant valuations are retained. In
‘aggregated turnover’. Entities which are We recommend each year you prepare particular:
‘connected’ (generally >40% common appropriate minutes to evidence group
ownership) or ‘affiliated’(general control transactions to manage possible private • start-up concession: The start-up
relationship) with the business entity can company loan exposures. Non-compliance concession allows an employee to
be included. This can include income of with these rules can expose a business to only be taxed on future realisation
overseas entities. The relevant thresholds additional taxes of up to 29% on wealth of the equity provided under the
where aggregated turnover is relevant are: transferred from group companies. CGT provisions. Certain valuation
$2m, $10m, $50m, $100m, $500m, $1bn concessions and requirements apply to
or $5bn. An entity is under a threshold 2.4.8 Personal Service Income/ this scheme;
where it meets any of the following: contractor documentation
• deferred concession: An employee
• aggregated turnover in the prior year is The ATO has renewed its focus on entities share scheme needs to have certain
under the threshold; which might be subject to personal service requirements to enable an employee to
income treatment. This treatment may have defer taxation until future realisation;
• aggregated turnover for the current the effect of mandating that income earned
year is likely to be under the threshold by an entity is taxed to an individual at a • loan scheme: Employees made be
and was not over the threshold in each higher marginal tax rate. offered loans to acquire equity which
of the two prior years; or are paid down through future equity
An effective strategy to mitigate against the returns. These loans need to be
• aggregated turnover for the current risk of these rules applying is to ensure that properly documented to comply with
year is under the threshold (worked out contractors are rewarded in compliance with tax and FBT requirements.
at the end of that year). the ‘independent contractor’ test.

EOFY planning manual FY2021/22 page 13

Business

2.4.10 Inter-entity agreements/ minutes This could occur in the following types of The COVID period affected many existing
The 2022 year-end may require a closer scenarios, for example: related party arrangements and it may
emphasis on related party transactions to be necessary to review and document
offset profits and losses in different group • interest on a loan from a related this impact. For example, if an overseas
entities. These transactions will need to be overseas party is taxed at less than operation was adversely impacted and
properly documented and reasonable to 10% in the overseas jurisdiction; generated a large loss, in may be possible
ensure they remain tax effective. to transfer price some of this loss to the
• a US holding entity ‘ticks-the-box’ Australian operation.
2.4.11 Not-for-profit tax exemption on an Australian entity to treat it as
a flow-through such that inter-entity We can assist you to ensure that your
Not-for-profit entities should assess their transactions are not taxed in the US; transactions continue to be compliant with
compliance with income tax exempt status transfer pricing rules and you fit within
from year-to-year. The ATO has released a • an expense paid overseas relates to existing concessions.
Self-Governance Checklist to help with this a separate hybrid arrangement an
process. overseas related party has with another 2.5.4 Thin capitalisation
related party.
2.5 International issues The thin capitalisation rules limit the amount
Therefore, you cannot be certain of the of deductible debt which can be maintained
2.5.1 Withholding taxes tax treatment in Australia of amounts in an Australia ‘global’ group. There is a
It is important that you review the terms of paid overseas unless you have a detailed general threshold of $2m interest at which
cross-border agreements to ensure that understanding of the worldwide group the rules apply.
withholding tax obligations are met. and the tax treatment in the overseas
jurisdiction. The ATO has set out a set 2.5.5 Permanent establishment
Payments may be non-deductible where of minimum information requirements
withholding tax requirements have not been it expects taxpayers to keep to ensure Where you have people working in an
met. The ATO is also looking at structures compliance with these rules. overseas location it may create a permanent
which seek to avoid withholding taxes. establishment of an entity overseas. This
2.5.3 Transfer pricing may create a taxable presence of the
2.5.2 Anti-hybrid rules company overseas. You should review this
Offshore related party transactions must as part of this year-end.
The Anti-hybrid rules are a complex set comply with Australian and overseas
of new legislation which seek to align the transfer pricing requirements to be
tax treatment of income and expenses in tax effective. The ATO and overseas
Australia with the tax treatment overseas. jurisdictions have certain safe harbours and
It does this by denying a tax deduction or documentation concessions which make
including an amount as assessable income this easier for SME entities to comply with
where there is a mismatch overseas. the rules.

EOFY planning manual FY2021/22 page 14

3. Individual year-end tax planning

2022 end of 3.1 Actions that should occur before 30 3.1.5 Asset write-offs
financial year is fast June 2022
approaching, but there Individuals not carrying on a business
is still time to get your 3.1.1 Superannuation contributions (e.g. employees) are not entitled to the
tax in order. instant asset write-off or temporary full
Superannuation contributions need to be expensing measures. Employees are
received by the fund before 30 June 2022 to limited to expensing assets costing less
be deductible. The concessional (deductible) than $300. Where employees wish to
limit for superannuation is generally $27.5k. access the full expensing measure for larger
There may also be an opportunity to use purchases (e.g. work vehicles) they may
unused limits from prior year. The fund will need to consider acquiring assets in related
need to be notified of the deduction and the business entities or packaging with an
individual should receive confirmation and employer.
retain this with their tax records.

3.1.2 Asset realisations - contract date 3.2 Other planning issues

Where an individual has made taxable 3.2.1 Varying PAYG instalments
capital gains it may be tax effective to
consider whether unrealised capital losses Consider varying the 4th quarter PAYG
can be realised. Capital gains and losses instalment in line with tax estimates where
are generally brought to account when forecast tax is lower that instalments.
sale contracts are signed rather than when
transactions settle. 3.2.2 Working from home deductions

3.1.3 Donations Consider whether the ATO short-cut 80c
per hour method (only available up to 30
Donations to deductible gift recipients may June 2022) or the normal 52c per hour with
be deductible where paid and receipted actual expenses for related home office
prior to 30 June 2022. equipment and internet costs will result in a
better home office claim. There should be
3.1.4 Prepayments an expectation that home office claims will
be higher during the COVID period where
Individuals may claim an immediate you were working from home.
deduction for prepayments not exceeding
12 months.

EOFY planning manual FY2021/22 page 15

Individuals

3.2.3 Vehicles and log books 3.2.7 Rental property expenses - interest You should discuss with your Bentleys
advisor.
Patterns of travel during the COVID period The ATO, through its rental property
may not be reflective of normal use. Make program, has been looking closely at the tax At Bentleys, we’re here
sure vehicle log books properly reflect treatment of interest on loans. In particular, to help you get where
business-as-usual travel arrangements and it is focussing on arrangements which seek you want to be.
adjustments are appropriately made for the to inflate ‘deductible’ interest and reduce
COVID period. ‘non-deductible’ interest through structuring 4. References
of loan facility arrangements.
3.2.4 Travel expenses 1. Australian Taxation Office, Product
We can assist you to review and properly Ruling PR 2020/12 ‘Income Tax: taxation
COVID had a large impact on the ability to implement and document deductibility of consequences for a customer entering into a
travel. The ATO is looking closely at travel interest on your rental property loans. Rural Prepayment Program with Elders Rural
expenses, particularly where employees Services Australia Ltd’ (9 December 2020)
may be living away from home rather than 3.2.8 Rental property expenses - no ABN
travelling on work. This should be a focus 2. PCG 2021/D2 Allocation of firm profits ATO
for this year-end. The ATO, through its rental property compliance approach
program, has been looking at payments
3.2.5 Private health insurance which property owners make to entities 3. Risk areas for HWIs (external website. The key
who do not provide their ABN. New rules risks the ATO has identified are:
Acquiring a compliant private health policy introduced for the 2020 financial year mean
may mitigate future Medicare levy surcharge that where a supplier does not provide • Payments and loans not complying with
amounts. It is important to check the an ABN and the property owner does not Dividion 7A (private company loan rules);
amount of rebate claimed through the fund withhold tax, no deduction will be available
and whether a catch-up payment may be for the outgoing. This could include ‘cash- • Using tax losses correctly and incorrectly
necessary on the income tax return. in-hand’ repair work on a rental property. classifying captial losses as revenue;

3.2.6 Rental property depreciation 3.2.9 Crypto-currencies • Lack of record keeping in relation to carry-
forward tax losses;
Building costs of a rental property and The ATO has a focus on individuals not
depreciation on new assets may be declaring gains and losses on Crypto- • Non-arms length arrangements with family or
additional non-cash costs you can claim currencies. Where you maintain this type related parties designed to reduce tax;
against your rental property. You may of investment you need to keep records of
need to engage with a quantity surveyor to your costs of investment and any potential • Revenue property sales treated as capital;
assess the amount of eligible costs. taxable events which may even occur where • Discrepancies between income tax returns and
you do not cash in the investment (e.g.
exchanging between crypto-currencies can business activity statements;
trigger a tax liability). • Incorrect GST treatment of vouchers and

deposits; and
• Incorrect treatment of input tax credits with

M&A activity
4. Self-governance Checklist (external website)

EOFY planning manual FY2021/22 page 16

5. Leadership team

The team at Bentleys NSW will help you get where you want to be. We're passionate about helping you achieve your
business goals, which is why we promise you certainty, clarity, relevance, responsiveness and innovation.
Whatever your goals, you deserve the support of advisors with the perspective, experience and skills to help you
grow. Get to know a bit more about our Bentleys NSW advisors today.

Nigel Banks | Director Kevin Cranfield | Director Colin Chirgwin | Director
Business services and advisory Business services and audit Tax advisory
[email protected] [email protected] [email protected]
As a business services director, Nigel Kevin is a business services and audit Colin is a tax director, providing specialist
specialises in providing high net worth director, specialising in audit, tax, accounting tax advice to a diverse range of clients. He is
individuals, professionals and business and strategic business advice for clients in well versed in the federal tax laws that impact
groups with commercial and solutions driven the middle market. upon every commercial decision.
business and tax advice. Kevin also advises a number of high-net- With a keen focus on trust and capital
worth individuals and family groups in relation gains tax rules, and Australia’s international
Nigel’s wealth of industry expertise to tax, accounting and financial advisory tax issues, Colin has advised on the
includes property and construction, retail requirements. establishment of business and investment
and wholesale, manufacturing, primary structures in foreign jurisdictions.
production and professional practices.

Chris Hope | Director Jannie van Deventer | Director Roger Ellinson | Director
Business services and advisory Business services Business services
[email protected] [email protected] [email protected]
Chris is responsible for a variety of clients in As a business services director, Jannie Roger is a business services director who
all types of family and business structures in specialises in outsourced services for is responsible for assisting clients with
the small to medium size enterprise market. Australian subsidiaries and branches of statutory compliance, tax, corporate affairs
Many of these businesses need practical overseas companies. and accounting. Roger also has extensive
hands-on assistance throughout their growth Jannie also provides business services experience in audit and in the Not for Profit
phase. They come from a diverse range of to Australian companies in the radio sectors including aged care, as well as real
sectors, including property, retail, wholesale, telecommunications, FMCG wholesale and estate agencies and property development.
motels, primary production, automotive information technology industries as well
dealerships and hospitality. as high net worth individuals and family
groups.

Jake Selinger | Director Renee Ross | Director Gerald Kenehan | Director
Business services Business services and advisory Business services and advisory
[email protected] [email protected] [email protected]
Jake provides advice to clients in the As a specialist in providing back-office and Gerald has over 32 years of experience
areas of business establishment, tax and outsourced accounting support, Renee in finance, tax, audit and corporate law.
corporate development. In recent years Jake is responsible for many of the firm's large
has advised on a number of international private groups and Australian subsidiaries of
corporate and tax restructures and has overseas parent companies.
performed business valuations for mergers
or litigation support.

EOFY planning manual FY2021/22 page 17

6. The Bentleys Network tax experts

Bentleys is a network of advisory and accounting firms, with over 700 talented staff delivering solutions from 18 locations across
Australia, New Zealand and China. We work with aspirational businesses and entrepreneurial people to help them achieve their
objectives and get where they want to be.
We take this opportunity to introduce you to some of our tax, R&D incentives, and business advisory specialists.

Simon How Colin Chirgwin Darren Lee
Partner, Tax (Chair of Tax Committee) Director Director, Tax
Bentleys SA/NT Bentleys NSW Bentleys NSW
[email protected] [email protected] [email protected]
+61 8 8372 7900 +61 2 9220 0700 +61 2 9220 0700

Michael Senchenko Nicole Black Mike Burfield
Client Director Director, Tax Managing Director
Bentleys NSW Bentleys Queensland Bentleys R&D Services
[email protected] [email protected]
[email protected] +61 7 3222 9777 +61 8 8372 7900
+612 9220 0700

Vicki Cremona Tomas Mackay Sonia Mascolo
Associate, Tax Manager Partner, Tax
McLean Delmo Bentleys Bentleys Tasmania Bentleys SA/NT
[email protected] [email protected] [email protected]
+61 3 9018 4666 +61 3 6242 7000 +61 8 8372 7900

Ross Prosper David Spurritt Dean Steer
Partner, Tax and Business Services Partner, Tax Partner, Tax
Bentleys WA Bentleys SA/NT Bentleys Queensland
[email protected] [email protected] [email protected]
+61 8 9226 4500 +61 8 8372 7900 +61 7 3222 9777

EOFY planning manual FY2021/22 page 18

7. Disclaimer

Our tax comments are based on current taxation law as at the date of this document is provided. You will appreciate that the
tax law is frequently being changed, both prospectively and retrospectively. A number of key tax reform measures have been
implemented, a number of other key reforms have been deferred and the status of some key reforms remains unclear at this
stage.
Unless special arrangements are made, this document will not be updated to take account of subsequent changes to the tax
legislation, case law, rulings and determinations issued by the Australian Commissioner of Taxation or other practices of taxation
authorities. It is your responsibility to take advice if you are to rely on our advice at a later date.
The income tax law includes various anti-avoidance provisions including a general anti-avoidance provision. We do not warrant
or make any assertions that the ATO will not seek to apply these provisions to a tax planning strategy you implement. All
strategies must be based on commercial reality and have regard to the various anti-avoidance provisions which might apply.
We are unable to give any guarantee that our interpretation will ultimately be sustained in the event of challenge by the Australian
Commissioner of Taxation.
The comments in this report are general in nature only and do not constitute advice based on your particular circumstances.
Accordingly, neither the firm nor any member or employee of the firm undertakes responsibility in any way whatsoever to any
other person or company for anyone seeking to rely on the comments in this report as advice.

EOFY planning manual FY2021/22 page 19

Where you want to be.

If you’re passionate about your
business and ambitious about
growth, then talk to Bentleys.

A member of Bentleys, a network of independent advisory
and accounting firms located throughout Australia, New
Zealand and China that trade as Bentleys. All members of
the Bentleys Network are affiliated only, are separate legal
entities and not in partnership. Liability limited by a scheme
approved under Professional Standards Legislation. A
member of Allinial Global – an association of independent
accounting and consulting firms.

1300 236 853 (1300 BENTLEYS)
bentleys.com.au