Getting ready for Tax Time 2023?

Preparing for tax return 2023 involves understanding the latest updates and requirements of Australian Taxation Law. While we can provide general guidance, it’s important to consult with a tax accountant for specific information. Here are some key points to consider:

• Personal Tax Rates:
• Personal Tax rate is same as last year. Low To Middle Income Tax Offset (LMITO) has now ceased. As a result, LMITO may see their tax refunds from July 2023 reduced by between $675 and $1,500 (for incomes up to $90,000 but phasing out up to $126,000)

• Expensive Car Limit:
• There is a limit on the cost you can use to work out the depreciation (including the instant asset write off and temporary full expensing) of passenger vehicles (except motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers. For Tax Year 2022/23 expensive car limit is $64,741.00.

• Working From Home (WFH):
• The 80 cents per hour “shortcut rate” and the 52 cents per hour fixed rate ceased to be effective for periods after 30 June 2022. The ATO has released a new Practical Compliance Guideline – PCG 2023/1 – which outlines a new method called the revised fixed rate method for claiming a deduction for working from home expenses in 2022-23 and beyond. With effect from 1 July 2022, the choices are:

• The 67 cents per hour fixed rate,
• Actual costs.

• 67 cents per hour worked from home. What’s included?

• energy expenses (electricity and/or gas) for lighting, heating/cooling and electronic items used while working from home
• Internet expenses
• mobile and/or home telephone expenses, and
• stationery and computer consumables.
• You cannot claim an additional separate deduction for any of these expenses if the fixed rate is used.
• You do not need to have a separate home office or dedicated work area set aside in your home in order to use the 67 cent fixed rate
• This criteria applies only to the 67 cents rate, not the actual method.

• Claiming deductions for charging electric vehicles – ATO fixed rate:
• The rate is 4.20 cents per kilometer. If electric vehicle charging costs are incurred at a commercial charging station (rather than in the home), a choice has to be made. The EV home charging rate can be used, but only if the commercial charging station cost is disregarded. If the commercial charging station cost is used, the EV home charging methodology cannot be applied. Further, all necessary records such as receipts must be kept to substantiate the claim, as per normal record-keeping rules

• Removal of the $250 threshold for self-education expenses:
• From 1 July 2022, the $250 non-deductible threshold for self-education expenses is removed.

• Small Business Technology Investment Boost:
• Businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20 per cent of the expenditure incurred for the purposes of business digital operations or digitizing its operations on business expenses and depreciating assets such as portable payment devices, cyber security systems or subscriptions to cloud based services. An annual $100,000 cap on expenditure will apply to each qualifying income year. This measure will apply to expenditure incurred in the period commencing from 7:30 pm AEDT 29 March 2022 until 30 June 2023. This measure hasn’t yet been legislated.

Small Business Skills and Training Boost

• Businesses with an aggregated annual turnover of less than $50 million small businesses will be able to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia.
• This measure will apply to expenditure incurred in the period commencing from 7:30 pm AEDT 29 March 2022 until 30 June 2024.
• This measure also hasn’t yet been legislated.

• Instant asset write off returns:
• Instant assets write off returns with a $20,000 threshold (and the end of TFE!) The instant asset write-off returns with a $20,000 threshold per asset from 1 July 2023 to 30 June 2024.

• Small businesses, ie those with an aggregated annual turnover of less than $10 million, will
  be able to immediately deduct the full cost of eligible assets costing less than $20,000
  that is first used or installed and ready for use between 1 July 2023 and 30 June 2024. The
  $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write
  off multiple assets.
• Assets valued at $20,000 or more (which cannot be immediately deducted) can be placed into
  the small business simplified depreciation pool and depreciated at 15% in the first income
  year and 30% each income year thereafter.
• These rules were effectively replaced by temporary full expensing (which allowed for the
  immediate write off of all eligible capital assets, without a monetary limit) in relation to
  depreciating assets first held, and used or installed ready for use for a taxable purpose,
  between the 2020 Budget time (6 October 2020) and 30 June 2023. Temporary full expensing
  therefore ends on 30 June 2023.

• • New tax incentive for small businesses to invest in energy-saving
    technology:

A bonus tax deduction will provide businesses with an annual
turnover of less than $50
million with an additional 20 per cent deduction on spending that supports electrification
and more efficient use of energy.

• Eligible assets or upgrades will need to be first used or installed ready for use between 1
  July 2023 and 30 June 2024. It will help small businesses make investments like electrifying
  their heating and cooling systems, upgrading to more efficient fridges and induction
  cooktops, and installing batteries and heat pumps.
• However, certain exclusions will apply, such as electric vehicles; renewable electricity
  generation assets, capital works; and assets that are not connected to the electricity grid
  and use fossil fuels.
• Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum
  bonus tax deduction being $20,000 per business

• Small Business Lodgment Penalty Amnesty:
• A lodgment penalty amnesty program will be provided for small businesses with aggregate
  turnover of less than $10 million to encourage them to re-engage with the tax system.
  The
  amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in
  the
  period from 1 June 2023 to 31 December 2023 that were originally due during the period
  from
  1 December 2019 to 29 February 2022.

• ATO Hotspots:
• The ATO issued a media release on 15 May 2023 highlighting three focus areas this tax
  time:

• rental property deductions,
• work-related expenses
• capital gains tax arising from the disposal of assets such as shares, crypto, managed
  investments or properties.

• • New ATO data-matching capability for rental properties:

The ATO is backing up its existing compliance focus on rental properties by entering into a
“data-matching protocol” with mortgage lenders. The move announced recently, comes as the
ATO claims that as many as 90% of all rental claims are incorrect. The data matching program
will collect:

• Client identification details – names, addresses, phone numbers, dates of birth.
• Loan account details – account numbers, BSBs, balances, total interest charges, total
  repayments, and commencement and end dates.
• Transaction details – transaction dates, transaction amounts, and whether the transaction
  was a debit or credit on the account.
• Property details – addresses of the loan asset.

Thank YOU !