The Tax Institute

The 2022 income year has brought with it legislative, administrative, and environmental changes.

From the legislative and administrative perspective:

• The corporate tax rate for base rate entities reduced from 26% to 25%.

• The ATO finalised their compliance approach to the allocation of profits or income from professional firms in the assessable income of the individual professional practitioner (PCG 2021/4).

• The Australian Taxation office (ATO) released draft guidance on the application of section 100A of the ITAA 36 (Draft TR 2022/D1 and Draft PCG 2022/D1) and a taxpayer alert (TA 2022/1) on how section 100A may be applied to parents benefitting from the trust entitlements of their children over 18 years of age.

• The ATO released draft guidance on when an unpaid present entitlement (UPE), or amount held on sub-trust, will become the provision of 'financial accommodation' for the purposes of Division 7A of the ITAA 36 (Draft TD 2022/D1), once finalised, will replace TR 2010/3 and PSLA 2010/4.

• The High Court decided in Carter[1] that a disclaimer of present entitlement to trust income after 30 June is not effective for purposes of section 97 of the Income Tax Assessment Act 1936 (ITAA 36).

• The Federal Budget brought minor changes…

From an environmental perspective:

• COVID-19 continued to affect businesses, both positively and negatively.

• The Federal election resulted in a change of Government.

Tax advisors should consider these factors in preparing for the end of the 2022 income year and in preparing tax returns for entities for the 2022 income year.

In addition to the above changes that affect the nature of tax compliance in the 2022 income year, the usual suspects should not be forgotten;

• the small business capital gains tax (CGT) concessions;

• tax residency issues; and

• the timing of relevant CGT Events (CGT Event A1 happens at the time of contract being entered into (if there is one)).

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