TAX TIME 2023 FOCUS AREA

 

Preparing for your tax return 2023 involves understanding the latest updates and requirements of Australian Taxation Law and provisions on Budget 2023. While we can provide general guidance, it’s important to consult with a tax accountant for specific and tailored 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)

 

• Company Tax Rates:

There is a two-tier system of company tax rates in Australia with a reduced tax rate applicable for entities which satisfy the definition of a Base Rate Entity (BRE).  The base rate entity tax rate is 25% while 30% for other entities.

 

• 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 working from home tax deduction 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 in it and can’t be claimed additionally?

o    energy expenses (electricity/gas) for lighting/heating/cooling/electronic items used while working from home.

o    Internet expenses

o    Mobile/home telephone expenses, and

o    stationery/computer consumables.

o    No separate home office/dedicated work required under this 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 must 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 substantiating 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 29 March 2022 until 30 June 2023. This measure hasn’t yet been legislated.

 Small Business Skills and Training Boost

 

o    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.

o    This measure will apply to expenditure incurred in the period commencing from 29 March 2022 until 30 June 2024.

o    This measure also hasn’t yet been legislated.

 

Instant assets 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.

 

o Small businesses (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.

o Assets valued at $20,000 or more 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.

o These rules were effectively replaced by temporary full expensing (which allowed for the immediate write-off 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 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 % deduction on spending that supports electrification and more efficient use of energy.

 

o Eligible assets or upgrades will need to be first used or installed ready for use during FY 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.

o 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.

o 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:

o rental property deductions,

o work-related expenses

o capital gains tax arising from the disposal of assets such as shares/crypto/managed investments/properties. 

 

• New ATO data-matching capability for rental properties: 

The ATO is backing up its existing compliance focus on rental properties by entering 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:

o Client identification details – names, addresses, phone numbers, dates of birth.

o Loan account details – account number/BSBs/balances/total interest charges/total repayments/commencement/end dates.

o Transaction details – transaction dates/amounts/debit or credit on the account.

o Property details – addresses of the loan asset.

 

To find out more on how these tax rules and provisions can be customized based on your personal circumstances, please schedule an appointment with one of our experienced tax agents / tax accountants / tax advisors in Perth by calling us on 08-9386 0047 or complete the online form here https://www.tfptax.com.au/online-tax-return/