The August 2022 tax and superannuation update covers important developments for homeowners, employees, retirees, and business owners. From capital gains on your home to salary sacrifice strategies and ATO collection efforts, here’s what you need to know.

Tax & the family home

Your main residence is usually exempt from capital gains tax (CGT), but there are exceptions. If your home is also your place of business or if you rent part of it out, the main residence exemption may only apply partially.

If you rent out a portion of your home, it’s a good idea to have it professionally valued beforehand. This can help reduce any future capital gain by resetting the cost base to market value at the time you started earning rental income.

The exemption generally applies from the date you move in. If you move in shortly after settlement, your home is still considered your main residence from acquisition.

Your pdf copy: Tax and family home

Tax Time Targets

With tax time approaching, the ATO is focusing on four key areas to ensure accuracy, compliance, and fairness in how deductions and income are reported:

• Record keeping: The ATO has consistently emphasised that deductions must be substantiated with clear documentation. This includes receipts, invoices, mileage logs, and any other records that support the expense claimed. Inadequate or missing documentation is one of the most common reasons deductions are disallowed during an audit. Keep digital or physical records for at least five years.
• Work-related expenses: To claim these deductions, you must have personally incurred the cost, not have been reimbursed, and be able to demonstrate a clear link to earning your income. The ATO is especially focused on people overclaiming for items like home office costs, car expenses, and mobile phone use. COVID-19 tests are deductible if they were used to determine your ability to attend work. Be cautious not to claim private expenses or estimated amounts.
• Rental property income and deductions: The ATO is paying close attention to landlords who omit or incorrectly report income, especially from holiday rentals and foreign properties. All income received—such as rent, back payments, insurance payouts, and bond money—must be declared. Only genuine expenses directly linked to earning rental income can be deducted. Ensure that property is genuinely available for rent when claiming deductions.
• Capital gains from crypto, property, or other assets: If you’ve sold or disposed of shares, cryptocurrency, NFTs, or property, these events can trigger capital gains tax. Even if you swapped crypto for another asset, that’s a disposal event. The ATO is using sophisticated data-matching tools to track undeclared gains and is particularly active in the crypto space. Keep accurate records of acquisition dates, purchase costs, and sales proceeds.

Failing to follow the ATO’s guidelines can lead to audits, penalties, or interest charges. If you’re unsure about a deduction or tax treatment, contact us at admin@eclipseadvisory.com.au

Your pdf copy: Tax time targets

Low and Middle-Income Tax Offset

The low and middle income tax offset (LMITO) has increased by $420 for the 2021–22 financial year (also known as the $420 cost of living tax offset). This has increased the base amount to $675 and the maximum tax offset amount to $1,500. The offset applies to people with a taxable income less than $126,000, who are Australian residents for tax purposes.

The offset amount, and the amount of any refund will differ for everyone depending on their individual circumstances. Those who are eligible don’t have to do anything different to claim the offset. It will be calculated for them when they lodge their tax return.

It’s important to remember it is not a cash refund or a tax bonus. The offset reduces the amount of tax you need to pay which can reduce your tax to zero. If there is any offset remaining, you will not receive that amount as a cash refund.

The ATO provides clarity on the tax consequences of trust disclaimers

The ATO has released a Decision Impact Statement following the matter of FCT v Carter [2022) HCA 10 (‘Carter’s case’), in which the High Court provided clarity on the tax consequences of situations involving legally valid trust disclaimers.

The High Court’s decision in Carter’s case settled a practical question as to how trust income is to be taxed when relevant trust entitlements are validly disclaimed by a beneficiary sometime after year end. Importantly, the Court’s decision does not adversely impact people who are beneficiaries of a trust and wish to retain their trust entitlements.

The decision upheld the ATO’s view that beneficiaries who had validly disclaimed their rights to trust entitlements after the end of the financial year were nevertheless liable to be taxed on them.

Providing employees with vaccine incentives or pets can lead to FBT obligations

The ATO is urging employers that have provided their employees with fringe benefits to consider their fringe benefits tax (FBT) obligations – including registering, reporting, lodging and paying FBT. The ATO expects many employers to have an FBT obligation for the first time due to benefits provided during COVID-19. A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages.

FBT returns for the 2022 FBT year were due by 23 May 2022 for employers lodging their own returns or those lodging by paper. Employers lodging through a registered tax professional had until 27 June 2022 to lodge. Employers that are registered for FBT but don’t need to lodge an FBT return for the year, will need to advise the ATO via a notice of non-lodgment form.

Your pdf copy: ATO provides clarity

In your 20s, 30s or 40s? The super rules that apply to you

The rules at different ages govern how much and when you can contribute to super, when you can get your hands on your savings and how much tax you will pay. These rules are designed to ensure super is used to its intended purpose – to provide retirement income – in exchange for the generous tax benefits on offer.

The super system is designed to help you save money for your retirement over your entire working life. It holds money contributed by you and your employer and will help supplement your income during your retirement years.

Once you are aged 18, your employer must pay SG contributions (10.5% in 2022-*23) on your behalf into your super account. The SG contribution rate is currently legislated to rise incrementally to 12% in July 2025.

Your pdf copy: In your 20s, 30s or 40s The super rules that apply to you

Salary sacrifice and super: How does it work?

Setting up a salary-sacrifice arrangement can be a great way to save extra for your retirement and potentially improve your financial position. The main benefits are:
Less tax on contributions

As salary sacrifice contributions come from your pre-tax salary, you only pay 15% tax on them when they enter the super system (if you earn less than $250,000) or 30% (if you earn over this amount).

Lower tax on investment earnings

Your super fund pays a maximum of 15% on investment earnings compared with your marginal tax rate outside the super system (up to 47% with the Medicare levy in 2022-23).

Reduced taxable income

By putting more of your salary into your super account, you reduce the amount of income on which your income tax is calculated. This could mean you and up paying less tax.
Salary sacrificing into your super account can be a great way to build your retirement savings and lower your tax bill. As an employee, you have a choice between using a salary-sacrifice arrangement to top-up your super or making a personal super contribution and claiming a tax deduction in your annual income tax return.

Your pdf copy: Salary sacrifice and super

Downsizer super contributions

If you are 60 years old or over, you may be able to contribute up to $300,000 from the proceeds of the sale of your family home into your superannuation fund, provided you have owned the property for at least ten years.

You must make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement.

A downsizer contribution doesn’t count towards any of the contribution caps. However, downsizer contributions will count towards your transfer balance cap. This cap applies when you move your super savings into retirement phase and will be considered for determining eligibility for the age pension.

You may wish to seek independent financial advice in relation to the age pension asset tests.

Your pdf copy: Downsizer super contributions

ATO Refocus on Debt Collection

The ATO has not pursued many business tax debts during the pandemic and allowed tax refunds to flow through even if the business had a tax debt.

That position has now changed and the ATO has resumed debt collection and offsetting tax debts against refunds. If you have a tax debt that has been on-hold, expect the ATO to offset any refunds against this debt, and take steps to actively pursue the payment of the debt.

Small business account for around two thirds of the total debt owed to the ATO. If you have a tax debt, it is important that you engage with the ATO to work out how this debt will be paid.

If you need assistance communicating with the ATO about debt or other matters, please contact us.

Ready, set, lodge!

The majority of taxpayers can now lodge their tax return as more than 80 million pieces of information are available in pre-fill.

Assistant Commissioner Tim Loh explained “Much of the information we collect from employers, banks, private health insurers, share registries and other institutions, is now ready to go in your tax return. If you also have all the information you need to manually include, then you have the green light to lodge.

Four out of five people receive a refund with most refunds issued in less than two weeks. This process can’t be sped up, even if you or your agent calls us.”