Published: 1 Jul 2022
As we enter the new financial year, we turn our minds to the new measures that commence in 2022–23 and those measures that have been announced but remain unenacted with a proposed commencement date of 1 July 2022.
Each year, practitioners are faced with a range of new tax measures that are in varying forms of progression and implementation. The checklists in this guidance have been split into legislated provisions commencing from 1 July 2022 and unenacted measures that are proposed to commence from 1 July 2022.
These checklists do not contain a comprehensive or exhaustive list of issues you need to consider for your clients from the commencement of the financial year. There may be other issues you need to think of. These checklists serve as a guide to a range of issues and do not constitute advice. They do not provide a detailed explanation of whether a taxpayer may be eligible for a deduction or a tax concession, or the relevant conditions for a provision or administrative approach to apply or not apply.
During 2021—22, the ATO released guidance on several matters which has or will (once finalised) have application from 1 July 2022. This includes the ATO draft guidance materials on section 100A and Division 7A that are currently subject to finalisation.
On 23 February 2022, the Commissioner issued draft guidance on how section 100A of the Income Tax Assessment Act 1936 (ITAA 1936) applies to trust distributions made to a beneficiary who is presently entitled to an amount of trust income, and that entitlement arises from or in connection to a reimbursement agreement. The draft guidance comprises:
The ATO also issued Taxpayer Alert TA 2022/1 Parents benefitting from the trust entitlements of their children over 18 years of age (TA 2022/1) on 23 February 2022.
Given section 100A is not subject to a limited amendment period1, the guidance has retrospective application. However, taxpayers with entitlements conferred prior to 1 July 2022 may rely on the administrative treatment in Trust taxation – reimbursement agreement (July 2014 web guidance) where the July 2014 web guidance provides a more favourable outcome to the taxpayer’s circumstances than PCG 2022/D1.
Trust entitlements conferred from 1 July 2022 will be subject to the guidance once finalised.
The ATO has provided simplified web guidance on when section 100A may apply to 2021–22 trust distributions. While the web guidance has been designed to assist registered tax agents and trustees understand when section 100A may apply to distributions conferred in the 2021–22 income year, it is equally relevant to the 2022–23 and later income years.
Further information on the ATO’s guidance materials, including detailed analysis and a flowchart on the operation of section 100A can be found in our blog.
The ATO issued draft Taxation Determination TD 2022/D1 Income tax: Division 7A: when will unpaid present entitlement or amount held on sub-trust become the provision of ‘financial accommodation’? (draft Determination) on 23 February 2022. The draft Determination describes when a private company beneficiary provides financial accommodation — and is therefore taken to have made a loan for the purposes of Division 7A of Part III of the ITAA 1936 — where it is made presently entitled to trust income of a trust and either:
The draft Determination will apply to trust entitlements arising on or after 1 July 2022. The prior guidance, Taxation Ruling TR 2010/3 Income tax: Division 7A loans: trust entitlements and Practice Statement Law Administration PS LA 2010/4 Division 7A: trust entitlements were withdrawn on 30 June 2022 and 1 July 2022 respectively, both with effect from 1 July 2022. However, taxpayers will be able to continue to rely on both TR 2010/3 and PS LA 2010/4 for trust entitlements arising on or before 30 June 2022.
Practical Compliance Guideline PCG 2017/13 Division 7A – PS LA 2010/4 sub-trust arrangements maturing in or after the 2016–17 income year (PCG 2017/13) has recently been updated to extend the application of this guideline to sub-trust arrangements maturing in the 2021–22 and later income years. If all or part of the principal of a loan entered into Investment Option 1 or 2 of PS LA 2012/4 is unpaid on the maturity of the loan arrangement, the Commissioner will accept that a 7-year loan on complying Division 7A terms may be put in place between the private company and sub-trust prior to the company’s lodgment day. This means that PCG 2017/13 applies to Option 1 or Option 2 sub-trust arrangements created in respect of trust entitlements arising between the 2009–10 to 2021–22 income years (inclusive).
Practical Compliance Guideline PCG 2021/4 Allocation of professional firm profits – ATO compliance approach (PCG 2021/4) sets out the ATO’s compliance approach to the allocation of profits or income generated by professional firms in the assessable income of the individual professional practitioner (IPP). PCG 2021/4 addresses arrangements where an IPP may be redirecting their income to associated entities, resulting in a reduced tax liability.
A PCG is not a taxation ruling. It does not set out the ATO’s interpretation or understanding of the law. It does not replace, alter or affect the operation of the law in any way. It does not set out whether Part IVA applies, or does not apply, to a particular type of arrangement. It is not legally binding on the Commissioner.
A PCG does, however, provide protection from interest on any tax shortfall and from penalties for making a false or misleading statement where a taxpayer has relied on it in good faith when determining their tax liabilities.
The compliance approach comprises two gateways, both of which must be satisfied for the IPP to apply the self-assessment risk framework.
PCG 2021/4 applies where all the below factors are met:2
Two gateways must be satisfied for the IPP to self-assess using the risk framework:
If you cannot satisfy both gateways, your arrangement is considered high-risk and you cannot apply the self-assessment risk framework.
If gateways 1 and 2 are satisfied, the PCG prescribes a risk scoring table for taxpayers to use during their self-assessment. The table lists three factors and ascribes a score for each factor depending on the outcome. The aggregate score of the factors determines the relevant risk assessment.
An aggregated risk score in the:
Any arrangements that commence from 1 July 2022 and satisfy all the criteria in paragraph 28 of the PCG are subject to PCG 2021/4.
The compliance approach outlined in the PCG will be applied by the ATO from 1 July 2022.
The ATO has advised the following transitional arrangements apply:
Further information can be found in our blog here.
The full content of this article, including the detailed checklists, is available to download or via the PDF viewer on the right.
One of Labor’s election policies, the Electric Car Discount, is proposed to be implemented from 1 July 2022. The policy will exempt many electric cars from:
Labor proposes to review the measure after three years of its implementation.
More information on the announcement can be found here.
These tables prepared by The Tax Institute provides helpful tax and superannuation rates and thresholds. The Tax Rates Tables can be found here.
The Tax Rates Tables will be updated regularly, so you will have access to the most recent information throughout the year.
From 1 July 2022, the TPB’s new continuing professional education (CPE) policy commences. This requires the completion of 120 CPE hours for tax agents and 90 CPE hours for BAS agents over a three-year period. The new policy aligns the TPB’s CPE period with other professional associations. The criteria for education considered as CPE continues to vary between the TPB and the other professional associations.
For education to count towards the CPE hours, the education must be relevant to the services the agents is providing. As of 1 July 2022, a 10% cap will permanently allow health and well-being education to be classified as CPE for agents. The TPB recognises the importance of mental health and well-being for agents to provide service for their clients.
More information on eligible CPE can be found here.
The former government announced a number of measures that are proposed to commence on 1 July 2023. These measures remain unenacted and it is unclear whether the new Government will proceed with these measures and, if so, whether the proposed start date of 1 July 2023 will be retained.
The list below sets out the tax measures that are either currently legislated, or are expected, to expire on 30 June 2023.
These measures were all enacted by the former government (other than the small business technology investment boost). If the Government chooses, and if legislated, the expiration date of these measures could extend beyond 30 June 2023.
The above checklists are not an exhaustive list of all the tax provisions practitioners should consider for 2022–23. The convening of the 47th Parliament on 26 July 2022 and the Federal Budget 2022–23, expected to be released on or around 25 October 2022, will provide practitioners with more certainty as to whether the unenacted measures discussed above will be legislated.
The Tax Institute’s Tax Policy and Advocacy (TPA) team have prepared a suite of products and resources to assist practitioners with understanding what has changed for 2022–23.
These products include:
The Tax Institute’s TPA team are committed to providing relevant and practical resources to support our members. Our website is regularly updated with new resources which we encourage you to view here.
Income Tax Assessment Act 1936
Income Tax Assessment Act 1997
Income Tax (Transitional Provisions) Act 1997
Superannuation Industry (Supervision) Act 1993
Superannuation Guarantee (Administration) Act 1992
Superannuation Industry (Supervision) Regulations 1994
Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Act 2022
Super and Business Measures Act 2022
Taxation Administration Act 1953
Acronyms and other abbreviations
Australian Business Number
Australian Business Register
Australian Eastern Daylight Time
Attribution managed investment trust
Australian Prudential Regulation Authority
Australian Taxation Office
Business activity statement
Board of Taxation
Corporate collective investment vehicle
Capital gains tax
Commissioner of Taxation
Continuing professional education
Digital games tax offset
Employee share scheme
Fringe benefits tax
Gross domestic product
Goods and Services Tax
Individual professional practitioner
Low Income tax offset
Low and Middle Income tax offset
Non-arm’s length income
Pay as you go
Retirement superannuation entity
Self-managed superannuation fund
Temporary full expensing
Tax Practitioners Board
Working from home
1 Item 17 of the table in section 170(10) of the ITAA 1936 allows the Commissioner to amend an assessment at any time for the purpose of giving effect to section 100A. It is widely understood that this means that the trustee of a trust can be assessed under section 99A at any time to give effect to section 100A, but section 170(10) also allows the Commissioner to amend the assessment of any other taxpayer to give effect to section 100A. This includes beneficiaries who may have been previously assessed under section 97 of the ITAA 1936 so that there is no double taxation.
2 PCG 2021/4 at .
DISCLAIMER: The material and opinions in this article should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.
Updated and correct as of: 11 July 2022