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
(e.g., 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 reported last month, 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 Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.