The Top 4 Australian Tax Changes That Your Business Needs To Know About In 2022

Do you find it hard to keep up with every tax change in Australia as a small business owner? 

Don’t worry, we’ve got you covered! Here are four new Australian tax changes your business should know about in 2022!

The key updates include: 

1. Rapid Antigen Tests (RATs) you use for work-related purposes are now tax-deductible
2. The Australian Taxation Office(ATO) has released new guidelines for tax practitioners to follow when verifying the identity of new clients 
3. The ATO released the Taxpayer Alert TA 2022/1, which targets family trust distributions where parents(high-income earners) benefit from the lower tax brackets of their adult children (low-income earners)
4. You can now claim tax on utes and other vehicles you use for your small business

If you want to know more about these updates, then read along!

1. Covid-19 Tax Deductibility for RATs

The COVID-19 pandemic has been a massive part of our lives. It’s become common to use RATs in offices and homes all over Australia to help reduce the risk of spreading COVID-19.

As an employer or employee, you have to pay high prices for RATs you can only use once to prove you’re fit for work, which adds a pinch to the pocket. 

On the 7th of February, it was announced by the Federal Government that RATs used to test COVID-19 for work purposes will be tax-deductible. 

Here are a few things to be aware of with this new tax deduction:

• All small businesses and individuals have eligibility 
• You can claim whether you’re required to attend your workplace, or you’ve got the option to work remotely
• To make a claim, you must keep the receipts of the RATS you’ve bought
• If you’ve lost the receipts, the ATO will accept other forms of your proof of purchase, e.g. a diary entry
• You can claim for the tests you purchased during the financial year of 2021/2022 when you lodge your 2021/2022 tax returns
• You can claim the RATs you bought from the 1st of July 2021
• If you’re an individual, the money you will get back depends on your tax rate e.g. if your income is taxed at 32.5% you will get around $6.50 back for a packet you bought for $20
• As a small business owner, you will be exempt from Fringe Benefits Tax (FBT) for the full cost of the RATs, e.g. every dual pack of RATs you give to your employees for $20 reduces their FBT liability by $20

Now that you have a good understanding of the RATs deduction let’s move on to the next tax update.

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2. New Client Identity Verification Guidelines

If you’re a tax practitioner, the ATO and the Tax Practitioners Board (TPB) have created new guidelines that you must follow when you verify the identity of any new clients.

The guidelines provide you with several verification methods to use separately or together. The verification methods are:

• Visual – Visually checking your client’s identification document
• Source ATO – Comparing data provided by the client against data on ATO systems
• Source Document Verification Service – Compare a client’s details on government-issued identity documents against details held by a DVS provider

There are also three situations where you’ll need to verify your client’s identity, evidence and the information they provide you. Let’s go through them:

1. When the new client is looking to hire a tax practitioner like yourself 
2. When a representative is seeking to hire a tax practitioner on another individual’s behalf
3. When a representative is looking to hire a tax practitioner for a non-individual

As a tax practitioner, here is what you need to be aware of:

• New clients need to provide you with the following information
  • Full name – First name and surname of the client or the individual or non-individual the new client is acting on behalf of 
  • Date of birth
  • Residential address
  • Australian Business Number (ABN)
  • Photo ID or Legal document– The client’s driver’s license or legal documents to show they have authority to be acting on behalf of another individual or non-individual
  • You also need to verify
    • All new clients and their representatives
    • Existing clients’ new representatives
    • Existing clients, if there are concerns the client isn’t who they’re claiming to be

I bet you’re wondering why these new guidelines are in place and how they will affect you as a tax practitioner and clients coming to you. Here’s how:

• They’re designed to protect clients and their businesses from tax fraud – Tax fraud is when criminals steal taxpayer identities. This has become increasingly common
• The guidelines will prevent devastating financial consequences on a client’s business if tax fraud happens 
• It will help secure your client’s data, financial information and personal information

As a tax practitioner, if you want to stay protected at all times, make sure you follow these new guidelines. If you fail to verify the identity of clients or individual representatives, you may be liable for a breach of the Tax Agent Services Act 2009 and disciplinary action.

If you need more information on how to best secure your business, why not hire a lawyer to ensure your protection.

3. Family Trust Tax Changes

You may have recently heard that the ATO has issued the Taxpayer Alert TA 2022/1 (Taxpayer Alert) regarding family trust distributions.

But what exactly is it, and how will this affect individuals and small business owners? 

Let’s go through it.

The primary aim of the Taxpayer Alert is to target parents who try to benefit from the lower tax brackets of their children aged over 18. What does this mean?

This is when parents give their adult children trust distributions. After this, they make their children return the distribution to reduce their taxes and keep the benefit. It is illegal to do this.

These are the impacts of the Taxpayer Alert you should know about as a business owner: 

• The ATO plans to stop family trust distributions  
• The ATO intends to charge family trustees 47% tax on distributions they make, with potential penalties 
• The Taxpayer Alert immediately applies section 100A of the Tax Act when parents benefit from the trust entitlements of their adult children. This means the highest tax rate is applied to your distributions
• Your ability to distribute trust income to family members with lower tax rates will be restricted
• The overall tax payable by your family group is likely to increase
• You may need to make additional tax payments
• The ATO can review your trust distributions going back to 2015

What should you do as a business owner who uses family trusts?

• The new documents set out four ‘risk zones’, find out which zone your trust is in as this will determine whether the ATO will review your trust
• Review your existing trusts and their distributions to resolve any issues so that the ATO doesn’t check them
• You may need to review your trust’s entire setup

4. Business Vehicle Tax Deduction:

As a small business owner, you’ve probably wondered, ‘Can I claim tax if I buy a ute or vehicle for my business?’.

You don’t have to wonder anymore because we’ve got the answer! The short answer is yes, but there are some catches. Let’s go through when you can and can’t claim tax deductions.

When can you claim tax on your vehicle as a small business owner

• When you mainly use your vehicle (ute) for work purposes and rarely use it for personal reasons, e.g. going to the shops
• To claim tax for the full cost of your vehicle (ute) without paying fringe benefits tax, you must use it solely for business purposes
• The maximum amount you can spend on a car if you want to claim taxes is around $60,733.
• Other vehicles that are used similarly to a car (e.g. motorcycles) don’t have a maximum spending limit under the Tax Act 

When can’t you claim tax on your vehicle as a small business owner

• If you buy a ute and put your business logo on it but only use it to get to work and back
• You can’t claim taxes on your private use of utes or any vehicle

Key takeaways

The Australian government constantly introduces new tax changes that may affect your business. The good news? We will always be here to help you and your business keep up.

If you want to know more about the changes discussed above, why not hire a lawyer with Lawpath to ensure you’re always on track.

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