It’s time for tax agents to get ready for the new tax time in 2022 and the most important thing they have to do is to roll over the system and update the work papers.

The Australian Taxation Office (ATO) has warned people not to double-dip in their deductions this year or run the risk of being audited. Using “sophisticated data analytics”, they can monitor incorrect information and therefore people can invite an audit for the Deductions claimed.

As per the Australian Taxation Office’s (ATO) latest bulletin, around 8.4 million Australians claimed nearly $19.8 billion in work-related expenses in 2021. During this 2022 tax year, ATO may focus on some of the areas where there might be a chance of double-dipping.

Below are some ‘double dipping’ mistakes that the ATO can focus on this tax time 2022.

  • A common mistake is that when working from home, the shortcut method is used to claim the working from home expenses, it is all-inclusive and there cannot be claim any additional amount in the tax return such as mobile phone, internet bills, or declined value of equipment and furniture. There are three methods available to claim a deduction for working from home expenses depending on individual circumstances:

(i) shortcut

(ii) fixed rate

(iii) actual cost.

The method that gives people the best outcome can be used, if the eligibility and record-keeping requirements for their chosen method are observed.

  • Nearly 3 million people claimed work-related car expenses in 2021, and the most common mistake was the cents per kilometer method to make their claim, and then double-dipping by claiming expenses separately such as fuel, car insurance, and registration.
  • Finally, the ATO is making sure taxpayers aren’t claiming expenses where they have already been reimbursed by their employer and it is important that these kinds of expenses are reviewed.


NALI/NALE rules: ATO extends its transitional compliance treatment

The ATO has advised that it is extending the transitional compliance approach contained in PCG 2020/5 by 12 months, ie to 30 June 2023. It has amended LCR 2021/2 to reflect this extension.

This means that the ATO will not allocate compliance resources in the 2022-23 financial year to determine whether the non-arm’s length income provisions apply to all the income of a super fund where it incurs non-arm’s length expenditure of a general nature on or before 30 June 2023.

The non-arm’s length income (“NALI”) rules in s 295-550 of the ITAA were amended by the Treasury Laws Amendment (2018 Superannuation Measures No 1) Act 2019 so that super funds are also taxed at 45% for related-party schemes involving nonarm’s length expenditure (“NALE”) not incurred that would normally be expected to apply in a commercial transaction.

The ATO issued Law Companion Ruling LCR 2021/2 on 28 July 2021, which sets out its views on the effect of changes to the NALI rules. Previously, on 1 June 2020, the ATO issued PCG 2020/5 setting out its transitional compliance approach for the application of the NALE rules to complying superannuation funds.

Start date for proposed amendments to APRA audit standard for super reporting.

APRA has released a response to consultation on its proposed amendments to Prudential Standard SPS 310 Audit and Related Matters (SPS 310).

APRA released proposed amendments to SPS 310 in 2021 to align it with recent changes to APRA’s reporting standards for superannuation. The specified data items that APRA proposes to subject to review include those that will be used for APRA’s administration of the Your Future, Your Super (YFYS) performance test and data published in APRA’s Heatmap.

In its response to the submissions – in the form of a letter to RSE licensees and RSE auditors – APRA states that it will delay the commencement of the proposed amendments. There will be no change to audit requirements for the 2022 financial year. Rather, APRA will finalise SPS 310 later in 2022 and the new requirements will apply to audits from the financial year ending 30 June 2023.

Insurance in superannuation: APRA standard SPS 250 finalised

APRA has registered the Superannuation (prudential standard) determination No 1 of 2022 to finalise its revisions to Prudential Standard SPS 250 (Insurance in Superannuation). With the objective of delivering better outcomes for their members with respect to insurance arrangements, the key revisions are that an RSE licensee must:

  • Obtain an independent certification of insurance arrangements with connected entities before entering into, renewing, or materially altering an insurance arrangement, and on a triennial basis. APRA may also require an RSE licensee to obtain such certification for an insurance arrangement with a non-connected entity;
  • Strengthen arrangements to protect members from potential adverse outcomes caused by conflicted life insurance arrangements. This includes heightened obligations on the RSE licensee to assess whether there are any business practices of the RSE licensee or terms and conditions of the insurance arrangement that may indicate the arrangement is not at arm’s length and whether the insurance arrangement is overall in the best financial interests of beneficiaries. This requirement increases the scope of the comprehensive review of the insurance management framework, conducted by operationally independent, appropriately trained, and competent persons at least every three years.
  • Satisfy itself, and demonstrate to APRA, that the rules for attributing any status to a beneficiary (including a class or cohort of beneficiaries) in connection with the provision of insurance are fair and reasonable; and
  • Include in the insurance management framework a process that enables beneficiaries to easily opt-out of insurance cover, and that sets out how this process will be communicated to beneficiaries. Revised SPS 250 commences on 1 July 2022 (subject to transitional arrangements).

Financial Planning updates

Proposed financial institutions supervisory levies

Treasury has released a discussion paper “Proposed Financial Institutions Supervisory Levies for 2022-23”. The proposed amount is a 0.9% decrease compared to the previous year of $262.0m.

For superannuation funds other than small APRA funds (SAFs), the restricted component of the 2022-23 levy is proposed to be calculated at 0.00406% (up from 0.00390%) of assets held by the entity, subject to a minimum of $10,000 (up from $7,500) and a maximum of $800,000 (unchanged). The unrestricted component of the 2022-23 levy is proposed to be calculated at 0.002993% (up from 0.002925%) of assets held by the entity. SAFs will be levied a flat amount of $590 per fund (unchanged).

Source: IPA Australia