What’s changing on 1 July 2022?

Clarke McEwan Accountants

A series of reforms and changes will commence on 1 July 2022. Here’s what is coming up:


For Business...


Superannuation guarantee increase to 10.5%


The Superannuation Guarantee (SG) rate will rise from 10% to 10.5% on 1 July 2022 and will continue to increase by 0.5% each year until it reaches 12% on 1 July 2025.


If you have employees, what this will mean depends on your employment agreements. If the employment agreement states the employee is paid on a ‘total remuneration’ basis (base plus SG and any other allowances), then their take home pay might be reduced by 0.5%. That is, a greater percentage of their total remuneration will be directed to their superannuation fund. For employees paid a rate plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their SG payments.


$450 super guarantee threshold removed


From 1 July 2022, the $450 threshold test will be removed and all employees aged 18 or over will need to be paid superannuation guarantee regardless of how much they earn. It is important to ensure that your payroll system accommodates this change so you do not inadvertently underpay superannuation.


For employees under the age of 18, super guarantee is only paid if the employee works more than 30 hours per week.


Profits of professional services firms


The ATO has been concerned for some time about how many professional services firms are structured - specifically, professional practices such as lawyers, accountants, architects, medical practices, engineers, architects etc., operating through trusts, companies and partnerships of discretionary trusts and how the profits from these practices are being taxed.


New ATO guidance that comes into effect from 1 July 2022, takes a strong stance on structures designed to divert income in a way that results in principal practitioners receiving relatively small amounts of income personally for their work and reducing their taxable income. Where these structures appear to be in place to divert income to create a tax benefit for the professional, Part IVA may apply. Part IVA is an integrity rule which allows the Tax Commissioner to remove any tax benefit received by a taxpayer where they entered into an arrangement in a contrived manner in order to obtain a tax benefit. Significant penalties can also apply when Part IVA is triggered.


A new method of assessing the level of risk associated with profits generated by a professional services firm and how they flow through to individual practitioners and their related parties, will come into effect from 1 July 2022. Professional firms will need to assess their structures to understand their risk rating, and if necessary, either make changes to reduce their risks level or ensure appropriate documentation is in place to justify their position.


Lowering tax instalments for small business – PAYG


PAYG instalments are regular prepayments made during the year of the tax on business and investment income. The actual amount owing is then reconciled at the end of the income year when the tax return is lodged.


Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government has set this uplift factor at 2% instead of the 10% that would have applied. The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year:

  • Up to $10 million annual aggregated turnover for GST instalments, and
  • $50 million annual aggregated turnover for PAYG instalments


The effect of the change is that small businesses using this PAYG instalment method will have more cash during the year to utilise. However, the actual amount of tax owing on the tax return will not change, just the amount you need to contribute during the year.


Trust distributions to companies


The ATO recently released a draft tax determination dealing specifically with unpaid distributions owed by trusts to corporate beneficiaries. If the amount owed by the trust is deemed to be a loan then it can potentially fall within the scope of the integrity provisions in Division 7A. If certain steps are not taken, such as placing the unpaid amount under a complying loan agreement, these amounts can be treated as deemed unfranked dividends for tax purposes and taxable at the taxpayer’s marginal tax rate. The ATO guidance deals specifically with, and potentially changes, when an unpaid entitlement to trust income will start being treated as a loan depending on the wording of the resolution to pay a distribution. The new guidance applies to trust entitlements arising on or after 1 July 2022.


For you...


Home loan guarantee scheme extended


The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. An additional 25,000 guarantees will be available for eligible first home owners (35,000 per year), and 2,500 additional single parent family home guarantees (5,000 per year).


Your superannuation...



Work-test repeal – enabling those under 75 to contribute to super


Currently, a work test applies to superannuation contributions made by people aged 67 or over. In general, the work test requires that you are gainfully employed for at least 40 hours over a 30 day period in the financial year.


From 1 July 2022, the work-test has been scrapped and individuals aged younger than 75 years will be able to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice superannuation contributions without meeting the work test, subject to existing contribution caps.


The work test will still apply to personal deductible contributions.


This change will also see those aged under 75 be able to access the ‘bring forward rule’ if your total superannuation balance allows. The bring forward rule enables you to contribute up to three years’ worth of non-concessional contributions to your super in one year.


Downsizer contributions from age 60


From 1 July 2022, eligible individuals aged 60 years or older can choose to make a ‘downsizer contribution’ into their superannuation of up to $300,000 per person ($600,000 per couple) from the proceeds of selling their home. Currently, you need to be 65 years or older to utilise downsizer contributions.


Downsizer contributions can be made from the sale of your principal residence that you have owned for the past ten or more years. These contributions are excluded from the age test, work test and your total superannuation balance (but not exempt from your transfer balance cap).


First home saver scheme – using super to save for a first home


The First Home Super Saver Scheme enables first home buyers to withdraw voluntary contributions they have made to superannuation and any associated earnings, to put toward the cost of a first home. At present, the maximum amount of voluntary contributions you can make and withdraw is $30,000. From 1 July 2022, the maximum amount will increase to $50,000. The benefit of this scheme is the concessional tax treatment of superannuation.

Have you considered the benefits of using a family trust? We share five ways

Protecting you and your business: using trusts

By Clarke McEwan • July 30, 2025
Have you considered the benefits of using a family trust? We share five ways that a trust can help you shelter your personnel assets and protect the future of your family and business? #trusts #familytrust #businesstips

The one big, beautiful bill that may not be so beautiful for Aussies

By Clarke McEwan • July 2, 2025
Where are things at? Australian superannuation funds currently have about $400 billion invested in the US and tax concessions are currently available under existing tax treaties. This could change. A new bill, backed by the Trump administration and recently passed through the House of Representatives proposes higher taxes on countries seen to be discriminating against US businesses, including Australia. If the bill becomes law, Australian super funds could face higher taxes on US investments, directly affecting the long-term returns of super funds. The implications Even if you don’t have direct investments in the US, this matters. If your business is tied to superannuation funds or if you rely on consistent super returns for your retirement planning, changes like these can add pressure. It also adds a layer of uncertainty for Aussie businesses operating globally. As trade tensions rise and tax rules shift, doing business internationally becomes more complex and potentially more costly. Tax experts say these changes could override existing treaties between the US and Australia. And they’re not just aimed at big corporates, any individual or entity with US exposure could potentially be affected in some way. What’s being done? Industry groups including the Financial Services Council are calling on the Australian Government to step in and protect Australian investors through diplomatic and trade channels. Major super funds have already met with US lawmakers, reminding them that Australia is a significant source of capital for US markets and that strong partnerships go both ways. That said, this legislation is still working its way through Congress and faces pushback even from some Republicans. But as one US political expert said, ‘Bills that looked doomed have passed before.’ We live in hope but it’s not over yet. What can you do? Using John Howard’s barometer, for now we’re at the be alert but not alarmed stage. If you’re managing a business, planning your retirement, or investing overseas, this is a reminder of how global politics can impact your bottom line. Here’s what we recommend: • Stay informed. Tax rules can change quickly • Ensure your retirement planning is flexible enough to adjust if needed or talk to us to help you • Talk to us if you’ve got exposure to US investments, but you might need some input from a US tax specialist. There’s undoubtedly a bit to consider in the world of tax / finance at the moment, the environment’s changing at pace. You’re not alone in this though, as always please reach out if you have any questions and concerns. We’re here to help.

Trust funds: are they still worth the effort?

By Clarke McEwan • July 2, 2025
Is there a shift away from trusts? In recent years, we have noticed a slight trend of businesses transitioning from trust structures to corporate entities. This shift is largely due to increasing scrutiny on how trusts are used and the growing complexities involved in managing trusts, particularly when it comes to documentation and compliance requirements. Trustees and directors of trustee companies are realising that they need to devote more time and resources to ensure compliance with evolving and complex regulations. One of the primary challenges in utilising trusts for business purposes is the need for timely and accurate decision making. Trustees are normally required to make decisions about distributions by the end of the financial year to prevent the profits of the trust from being taxed at penalty rates. This timing can be problematic as it might not align with the availability of complete financial information, especially for businesses that are actively trading. This can lead to difficulties in making informed decisions regarding the distribution of trust income and to achieve optimal tax outcomes. The ATO has also intensified its focus on trust arrangements, especially when it comes to the use of integrity rules which have formed part of the tax system for many years, but haven’t tended to be applied all that often. The risk of making mistakes and being detected is probably higher than ever before. All’s not lost (we’re here to help) While the landscape around trusts is evolving and the scrutiny is high, this doesn’t mean that trust structures don’t still have their place. With the right support (support that we can provide in conjunction with other experts) trusts can still offer advantages that other structures can’t. They can still be a useful platform for passive investment activities, estate planning and as part of a business structure. This isn’t the time to give up on trusts. But it is important to seek advice before setting up a trust to make sure it is the most appropriate option and to fully understand the advantages, disadvantages and practical issues that will need to be managed when using a trust structure.

Finfluencers: bad tax advice could cost you

By Clarke McEwan • July 2, 2025
Finfluencers: bad tax advice could cost you Relying on this advice could not only leave you out of pocket but also expose you to ATO penalties, fines or in the worst case scenario - prosecution. What’s the problem? Many finfluencers make money by promoting financial products on behalf of companies, which means that they don’t necessarily have your best interests in mind when sharing information or insights. Finfluencers aren’t always qualified to provide advice on tax or financial products. You just can’t expect to receive solid, reliable or tailored guidance. Unfortunately, we’re seeing some influences share tax hacks that are either completely false or apply only in extremely limited situations. The ATO and some of the accounting professional bodies have sounded the alarm on some recent false claims, including: • Claiming your pet as a work related guard dog • Writing off luxury handbags as laptop bags • Deducting fuel costs without any documentation • Trying to claim swimwear as a work uniform These kinds of suggestions might sound plausible but following them could get you into serious trouble. The ATO uses sophisticated data matching tools to detect suspicious or inflated claims. If your deductions don’t meet the legal criteria, this could trigger an audit and if mistakes are found, the consequences can include: • An increased tax liability • Interest charges • Fines • A criminal record and in the most serious cases, imprisonment. Here’s how to stay safe and tax smart: • If it sounds too good to be true, it probably is. Dodgy deduction tips on social media are best ignored, at least until they can be verified. • Stick to trusted sources. For official tax guidance, visit ato.gov.au. • Don’t risk your business or personal reputation for a quick deduction. If you aren’t sure, please reach out to us and we can help you stay compliant, no filters or hashtags!

Important tax update: deductions for ATO interest charges scrapped

By Clarke McEwan • July 2, 2025
What are the interest charges? There are two main types of interest that are charged by the ATO. These are: • General Interest Charge (GIC) : This applies when you pay your tax liability late. The ATO applies GIC to encourage tax liabilities to be paid on time and ensure taxpayers who pay late don’t have an unfair advantage over taxpayers who pay on time. GIC is calculated on a daily compounding basis on the overdue amount. The GIC annual rate for the July – September 2025 quarter is 10.78%. • Shortfall Interest Charge (SIC) : This is applied when there is a shortfall in tax paid because of an amendment or correction to your tax assessment. SIC is also calculated on a daily compounding basis. The SIC annual rate for the July – September 2025 quarter is 6.78%. The ATO applies SIC to the tax shortfall amount for the period between when it would have been due and when the assessment is corrected. What’s changing? Historically, both GIC and SIC amounts could be claimed as a deduction. This has meant that the net after-tax cost of the interest charges has been reduced for taxpayers who have a positive income tax liability for the relevant income year. However, the Government has passed legislation to ensure that GIC and SIC amounts incurred on or after 1 July 2025 are no longer deductible, even if the interest relates to a tax debt that arose before this date. As these interest charges are no longer deductible, this means that the after-tax impact of the charges is higher for many taxpayers. The impact becomes greater as your tax rate increases. For example, let’s take a look at two individuals who have the same level of tax debt owed to the ATO and the same level of tax debt owed to the ATO and the same GIC liability of $1,000 for a particular income year: • Sally is a high income earner and subject to a 45% marginal tax rate (ignoring the Medicare levy). Under the old rules the net cost of the interest charge was only $550 because she could claim a deduction for the GIC amount and this reduced her income tax liability by $450. Under the new rules no deduction is available and the full cost to Sally will be $1,000. • Adam is subject to a 30% marginal tax rate (again, ignoring the Medicare levy). Under the old rules the net cost of the interest charge was $700 because he could reduce his income tax liability by $300 by claiming a deduction for the GIC amount. As with Sally, under the new rules no deduction is available for the GIC and the full cost to Adam is $1,000. What can I do to minimise the impact of this change? The simple answer is to pay down ATO debt as quickly as possible. As you can see, the GIC rate is relatively high and continues to accrue on a daily basis until the debt is paid off. The faster you can pay off that debt, the lower the interest charges that will accrue. If you can’t afford to pay off your ATO debt in the short term then you might want to explore other options, including whether you would be better off borrowing money from another source at a lower interest rate to pay off the ATO debt. In some cases it is possible to claim a deduction for interest accruing on a loan that is used to pay tax debts, although this is normally only possible if the debt arose from business activities. It isn’t normally possible to claim a deduction for interest accruing on a loan that is used to pay a tax debt that arose from investment or employment activities. While the ATO will sometimes allow taxpayers to enter into a payment plan so that tax debts can be paid through instalments, tax debts that are subject to a payment plan still accrue GIC. On a more proactive basis, a better option is to plan ahead to ensure that upcoming tax payments can be made on time. This will sometimes mean setting aside funds regularly for tax instalments, GST, PAYG withholding and other amounts that need to be paid to the ATO. Keeping these amounts separate will help to ensure you’re ready when the ATO bill arrives. If you're currently carrying tax debt or need help staying ahead of your obligations, we're here to help. Let’s work together on a strategy that keeps you compliant and protects your bottom line.

Div 296 super tax and practical things to consider

By Clarke McEwan • July 2, 2025
How does it work? While we are waiting to see whether the measure will become law, let’s assume for the moment that the Government passes legislation which is consistent with the Government’s announcements to date. If so: • If your TSB is over $3 million at 30 June, a portion of your annual superannuation earnings above that threshold will be taxed at an additional 15%. • The tax is assessed to you personally and can be paid from your super or your own funds. • Superannuation earnings for this purpose reflect the increase in your net super balance for the year, adjusted for certain contributions (eg, inheritance via death benefit pension) and withdrawals. • Some exclusions apply: children on super pensions, structured settlements (personal injury), and the deceased. It is important to remember that your TSB is the aggregate of all Australian superannuation interests (including balances with APRA funds, SMSFs and defined benefit schemes) held at the end of the income year. If the start date is 1 July 2025, then the first test date will be 30 June 2026. An individual’s TSB at this date, and each following 30 June, will determine whether they will have a Division 296 tax liability for that income year. Only where the individual has a TSB on 30 June in excess of $3 million will they have a Division 296 tax liability for that income year. Examples Sam’s account • 30 June super balance: $4 million. • Annual growth: $120,000. • Portion above $3m: ($4m–$3m)/$4m = 25% • Taxable earnings: $120,000 x 25% = $30,000 • Extra tax: $30,000 x 15% = $4,500 Lisa’s inheritance • Lisa’s balance rises from $2m to $4.5m after receiving a death benefit pension. • Only new investment growth (not the transferred amount) is taxed as earnings, but a total balance over $3m means she may still have a liability. What can you do? • Review your super fund liquidity and cashflow planning for future tax payments • Ensure your asset valuations are up to date • Estimate your combined super balances and plan for any large transactions • Document asset values, especially for SMSF members • Seek tailored professional advice before making any changes While we are waiting to see whether the legislation passes through Parliament and whether any significant amendments or adjustments are made to the proposed measures, if you have any questions or concerns around this in the meantime, reach out – we’re here to help.
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