Tax Time 2023 for Individuals

Tax Time 2023

ATO Processing Dates

The ATO will start full processing of tax returns on the 7th of July 2023 with refunds being released from the 16th July 2023.

Please be aware that to ensure you receive your full entitled refund, all your income is declared. Most importantly, ensure your income statement is finalised with your employer. ATO prefills are generally not finalised early in July and you risk omitting essential information from your income tax return if you lodge too early.

Your Bank Account

You must confirm your bank details with us each year. Please bring them to your interview and we will check what we have on file and update them if required. They will not be on the copy of the return you receive from us for privacy and security purposes.

Our Fee from Your Refund

If you require our fee to be deducted from your refund, please let us know before the return is lodged. Additional paperwork is required to be signed as your authority for us to deduct our fee.

Lodgement and Payment

Please note that our fee for individual tax returns is due and payable at the time of the consultation and tax returns are only lodged if your account has been paid. Payments can be made on the day via EFTPOS, Credit Card, Cash and bank transfer.

 

We have several options to help you get your tax return prepared. They are:

  • Email all required documentation to our office
  • Attend our office at a pre-booked appointment
  • Book a telephone appointment
  • Drop off at reception
  • Post to our office

 

Your Income Tax Return Requirements

The type of income you need to declare is listed below.

 

You also need to declare any money or earnings you receive from:

  • Crowdfunding
  • Air BNB, Apartment/House sharing
  • Uber and other ridesharing apps and services

 

Wait for your employer to mark your income statement as ‘tax ready’ before you prepare and lodge your tax return. Your employer should mark your income statement as ‘tax ready’ by 14 July. If you have more than one employer, you may receive several income statements or both a payment summary and an income statement. You will need to check that income from all your payment summaries is included in your tax return.

Basic Rules to Claim a Tax Deduction

You must have incurred the expense in 2022-2023. To claim a deduction for a work-related expense:

  • you must have spent the money yourself and were not reimbursed
  • the expense must be related to earning your income
  • you must have a record to prove the expense (Format for Records)

 

The expense must not be private, domestic, or capital in nature. For example, the costs of normal travel to and from work, and buying lunch each day are private expenses.

If you incurred an expense that was both work-related and private or domestic, you can claim a deduction only for the work-related part of the expense.

If you incurred an expense that was capital in nature, you may be able to claim a deduction for the decline in value of the depreciating assets you bought.

If you incurred an expense for services paid in advance, you will need to decide what part of the expense is deductible in 2022-2023.

You cannot claim a deduction for an expense to the extent that:

  • someone else paid the expense, or you were or will be, reimbursed for the expense, or
  • the payment or reimbursement is a fringe benefit (including an exempt benefit).

If you were partially reimbursed for the expense, you can only claim the part that was not reimbursed.

Working from Home Shortcuts

The Australian taxation office is making changes to the methods available for calculating work-from-home deductions. From the 1st of July 2022, taxpayers can continue to claim their actual expenses, or alternatively, they can use the revised fixed rate method.

Revised fixed-rate method.

The revised fixed-rate method apportions the following additional running expenses you incur on a fair and reasonable basis by using a fixed-rate of 67c per hour for each hour you work from home during the income year:

  • energy expenses (electricity and or gas) heating/cooling and electronic items used while working from home
  • internet expenses
  • mobile and/or home telephone expenses, and
  • stationery and computer consumables.

 

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.

To use the 67-cent fixed rate the taxpayer must meet the following criteria:

First criterion – working from home.

To satisfy the criterion you must be working from home while carrying out your employment duties or while carrying on your business on or after 1 July 2022. The work has to be substantive and directly related to your income-producing activities. As such minimal tasks such as occasionally checking emails or taking telephone calls while at home will not qualify as working from home.

Second criterion – incurring deductible additional running expenses.

To satisfy this criterion, you must incur additional running expenses such as electricity and gas, internet phone and stationery however you do not have to incur every single expense.

Third criterion – keeping and retaining relevant records.

To satisfy this criterion you must keep:

  • records showing the total number of hours you worked from home during the income year.
  • one document such as an invoice, bill or credit card statement for each of the additional running expenses which you have incurred during the income year.

 

For the 2023-24 and later income years you must keep a record for the entire income year of the number of hours you worked from home during that income year. An estimate for the entire income year or an estimate based on the number of hours you work from home during a particular period and applied to the rest of the income year will not be accepted. A record of your hours for the income year can be in the form of:

  • time sheets
  • rosters
  • a diary or similar document kept contemporaneously

 

Actual Costs Method

If the taxpayer wishes to use the actual costs method, they must have a dedicated office in their home.

You can claim a tax deduction for the work-related proportions of household cost such as:

  • Heating, cooling and lighting bills
  • Costs of cleaning your home working area (including cleaning products or payment for a domestic cleaner if required)
  • Depreciation of home office furniture and fittings
  • Depreciation of office equipment and computers
  • Costs of repairing home office equipment, furniture and furnishings
  • Small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately (they don’t need to be depreciated)
  • Computer consumables (like printer ink) and stationery
  • Phone (mobile and/or land line) and internet expenses
  • A diary (or other substantiation, such as timesheets) is needed to record working from home hours (for a typical 4-week period).

 

Taxpayers also need to work out the amount of the home (by floor area) that they’re using as their workspace.  From this, they can then work out the work-related proportion of their household expenses and apply this percentage to the actual amount spent on electricity, gas, phone and internet, etc. All the original bills to prove the claim also need to be kept.

In addition, taxpayers must be able to demonstrate that the split between work and private usage is reasonable, e.g. for utility bills and cleaning expenses, you must demonstrate that the use of the work-related proportion (based on the floor area of the home office as a proportion of the total floor area of the property) is reasonable.

 

ATO Guidelines

Claiming a deduction for additional running expenses incurred while working from home – ATO compliance approach.

Link: ATO Guidelines for Claiming a deduction for running expenses

If you would like to discuss what the new rules might mean for you, please get in touch with your accountant at Wilson Colman.

 

Car Expenses Simplified

Two methods are available to claim car expenses:

  • Logbook
  • Cents per kilometre

 

The logbook method is based on the business use percentage of the running costs. The logbook must be kept for 12 consecutive weeks every 5 years unless your pattern of usage changes.

The cents per kilometre method is capped at 5000km and is based on 72 cents per kilometre for 2022-2023.

 

Work-related Home/Mobile/Phone and Internet Usage

To Bundle or Not to Bundle…

About non-bundled internet and phone expenses – taxpayers must keep invoices or receipts to evidence that the expenditure has been incurred. The ATO advises that a reasonable basis for identifying the portion of work-related expenses includes:

  • Adding all the actual work-related calls from your itemised telephone account and/or
  • Use a diary to figure out the work-related part of your phone and internet use over four weeks.

 

Bundled expenses – again the taxpayer must keep a four-week diary to identify the work-related portion of use. However, the internet and phone part need to be shown either by a breakdown of relevant costs by the supplier or a percentage of relative costs if they were separately purchased from a supplier.

 

Clothing and Laundry

A tax deduction is available for the cost of buying and cleaning certain occupation-specific clothing, protective clothing, and some unique or distinctive clothing. You cannot claim for conventional clothing including drill shirts.

This expense category will be an area of focus for the ATO for 2023.

For more detailed information on claiming your work related expenses, please see the ATO website Deductions and Record Keeping

 

Zone Tax Offset – FIFO (Fly-in-Fly-Out)

The Zone Tax Offset is now limited to people who are genuinely living in a designated geographical zone. It will exclude “fly-in-fly-out” (FIFO) and “drive-in-drive-out” workers from the Zone Tax Offset where their usual place of residence is not within a “zone”.

 

Personal Income Tax Rates

The following rates apply to resident individuals for the 2023 income year:

Taxable Income

$

 Tax Payable1
0 – 18,200 Nil
18,201 – 45,000 19% of excess over $18,200
45,001 – 120,000 $5,092 + 32.5% of excess over $45,000
120,001 – 180,000 $29,467 + 37% of excess over $120,000
180,001+ $51,667 + 45% of excess over $180,000
  1. The above rates do not include the Medicare levy of 2%.
  2. The tax-free threshold may effectively be higher for taxpayers eligible for the Low Income Tax Offset, the Seniors and Pensioners Tax Offset and or certain other tax offsets

Low-income Thresholds – Individuals

 

Single Taxpayer

 Threshold Amount1

$

 Phase-in Limit2

 $

 2% at or Above3

$
Single taxpayer not eligible for Seniors and Pensioners Tax Offset 24,276 24,277 – 30,345 30,346
Single taxpayer eligible for Seniors and Pensioners Tax Offset 38,365 38,366 – 47,956 47,957
  1. No Medicare Levy is payable on taxable income levels at or below the Threshold Amount.
  2. If taxable income falls within the Phase-in Limit, the Medicare Levy is payable at 10% of the excess over the Threshold Amount.
  3. The Medicare Levy of 2% applies to the entire amount of taxable income.

Low Income Tax Offset

Resident individuals (including trustees assessed under S.98 of the ITAA 1936 in respect of presently entitled resident beneficiaries) may be entitled to the Low Income Tax Offset (‘LITO’).

Taxable Income

$

 Tax Offset1
0 – 37,500 $700
37,501 – 45,000 $700 – (5% of excess over $37,500)
45,001 – 66,667 $325 – (1.5% of excess over $45,000)
66,668+ Nil
  1. A minor who is not an ‘excepted person’ is ineligible to apply the LITO to reduce tax on their unearned (i.e., Div. 6AA) income.

 

ATO Audit Hot Spots

We are expecting far greater audit activity with the ATO paying special attention to the following claims:

  • High work-related claims
  • Motor vehicle expenses
  • Claims for expenses that have already been reimbursed by an employer
  • Rental properties – with a focus on claiming repairs to newly acquired properties, interest claims, holiday homes
  • Air BNB operators or hosts
  • Capital Gains Tax issues with applying for the main residence exemption
  • Uniform and laundry claims
  • Capital gains from crypto assets, shares & property

 

Super Contribution

The maximum concessional (tax-deductible) contribution for 2021-2022 increased to $27,500 and remained the same for 2022-2023.

The maximum non-concessional (after-tax, no tax deduction) contributions are:

  • Under 67 – $110,000 (or $330,000 over 3 years)
  • 67-74 – $110,000

 

The above contribution caps are subject to the following:

  • Before 1 July 2022, if you were 67 to 74 years old you could only make or receive voluntary contributions (both concessional and non-concessional) to our super if you met the work test. That is, you must work at least 40 hours over a 30-day period in the relevant financial year.
  • From 1 July 2022 this requirement was removed except for individuals wishing to claim a personal super contribution deduction.
  • Those aged 75 and over normally can’t contribute to superannuation.
  • Any concessional contributions over the limits will attract tax at the individual members’ marginal rate of tax, plus an interest charge.
  • Concessional contributions include Superannuation Guarantee Contributions and Salary Sacrifice Contributions.

 

From 1 July 2022, if your total superannuation balance is greater than or equal to $1.7 million, you will no longer be eligible to make non-concessional contributions.

The 3-year bring-forward rules are now far more complex due to total super balance restrictions and transitional provisions – advice should be sought on eligibility before making these contributions.

Super Deductions for Personal Contributions

You may be able to claim for personal super contributions that you made to a complying taxed super fund from your after-tax income. The personal super contributions you claim as a deduction will count towards your concessional contributions cap.

If you are 67 to 74 years old, you still need to meet the work test or work test exemption criteria to be eligible to contribute and claim a tax deduction.

If you are 75 years old or older, you can only claim a deduction for contributions you made before the 28th day of the month following the month in which you turned 75 years old.

Before you can claim a deduction for your personal super contributions, you must have given your super fund a Notice of Intent to Claim. Your fund will then send you an Acknowledgement letter. We must have a copy of the Acknowledgement letter before we can lodge your tax return.

Please click on the link below or ask us to send you a form.

Notice of intent to claim or vary a deduction for personal super contributions

Carry Forward Contributions

Carry forward contributions are not a new type of contribution; they are simply new rules that allow people to use any of their unused concessional contributions cap on a rolling basis for five years.

This means if you don’t use the full amount of your concessional contribution cap in a year starting from 2018-19, you can carry forward the unused amount and take advantage of it up to five years later provided your total super balance at the start of the year is below $500,000.

Super Fund Rates of Tax on Concessional Contributions

The rate of tax on concessional (tax-deductible) contributions is generally 15%. However, there is an additional tax of 15% paid by people whose combined income and concessional super contributions exceed $250,000. This is known as Division 293 tax and is levied on the excess over this $250,000 threshold, or on the super contributions, whichever is less. The additional 15% tax will be payable by the member, but the member can elect to withdraw funds from the superannuation fund to pay the added tax.

Superannuation Spouse Contribution Tax Offset 2023

This offset is available for contributions made on or before 30 June by a taxpayer to a Complying Superannuation Fund or Retirement Savings Account in respect of their low-income or non-earning spouse (married or de facto and under 67, or 67-74 and satisfy work test). Your spouse’s total superannuation balance on 30 June of the previous financial year must be below the general transfer balance cap ($1.6 million in 2020-2022 and $1.7 million in 2022-2023). The amount of the offset is:

Superannuation Spouse Contribution Tax Offset

The tax offset applies to non-concessional contributions a taxpayer makes for their low- income earning or non-working spouse (married or de facto). The amount of the offset for 2022/23 is set out in the table below.

Spouse’s Assessable Income (SAI)1,2

$

 Maximum Rebatable Contributions (MRC)

$

 Maximum Offset3

$
0 – 37,000 3,000 540
37,001 – 39,999 3,000 – [SAI – 37,000] MRC x 18%
40,000+ Nil Nil
  1. Including reportable fringe benefits and reportable employer superannuation contributions but excluding any assessable First Home Super Saver released amounts.
  2. No offset is available if the spouse exceeds their non-concessional contributions cap for 2022/23 or their total superannuation balance (as at 30 June 2022) equals or exceeds the general transfer balance cap for 2022/23 of $1.7 million.
  3. The offset is calculated as 18% of the actual contributions, if this results in a lower amount.

Government Co-contribution

If an individual is a low or middle income earner (and satisfies other eligibility requirements), and makes personal (non-concessional) contributions, the Government will make a co- contribution of $0.50 for every $1 contributed, up to a maximum amount. The co-contribution income thresholds and maximum amount for 2022/23 are as follows:

Total Income1 Maximum Co-contribution2
$0 – $42,016 $500
$42,017 – $57,015 $500 – [3.333% x (Total Income – $42,016]
$57,016 + Nil
  1. ‘Total Income’ is the sum of assessable income (excluding any assessable First Home Super Saver released amounts), the reportable fringe benefits total and reportable employer superannuation contributions. If the individual carries on a business, deductions may be taken into account in certain circumstances.
  2. An individual is ineligible for a co-contribution for 2022/23 if their non-concessional contributions (‘NCCs’) exceed their NCC cap or their Total Superannuation Balance on 30 June 2022 is generally $1.7 million or more.

Downsizer Contribution

A downsizer contribution of up to $300,000 into your super can be made from the proceeds of selling your Australian family home, provided that:

  • You are 65 years or older at the time you make the contribution (proposed to reduce age to 60 from 1 July 2023)
  • You (or your spouse) owned your home for at least 10 years
  • You make the contributions within 90 days of selling your home: and
  • You complete a downsizer contribution to super form

You can only make downsizing contributions for the sale of one home. If you sell your home and make a downsizer contribution, there is no requirement for you to buy another home.

Downsizer contributions are not classed as non-concessional contributions and therefore are not included in your non-concessional contributions cap. They are not tax-deductible and are included in deciding your eligibility for the aged pension.

 

ATO Warning re TFN and ABN Scams

The ATO is urging taxpayers to be vigilant following an increase in reports of fake websites offering TFNs and ABNs for a fee. The ATO states that the fake TFN and ABN services are often advertised on social media platforms like Facebook, Twitter, and Instagram – together with an offer to obtain a TFN or ABN for a fee. But instead of delivering this service, the scammer uses these fraudulent websites to steal both money and personal information.

 

A few things you need to know…

 

Client Portal

With the ever increasing risk of identity fraud, Wilson Colman are always looking for ways to improve our security. Having an encrypted online client portal means as a practice we can stay compliant with data security breach laws and provide our clients with an efficient document-sharing tool. The establishment and use of the client portal is an ongoing process.

 

Digital Signing

Where possible we will endeavour to opt for digital signing straight to your email. This will allow signing also on your mobile phone.

Digital signing offers numerous advantages that make it an essential tool in today’s digital age. Firstly, it ensures the integrity and authenticity of electronic documents, providing a reliable method to verify their origin and detect any tampering or unauthorized modifications. This bolsters trust and eliminates the need for physical signatures, saving time and resources. Additionally, digital signing enhances security by using cryptographic techniques to protect sensitive information, safeguarding against fraud and unauthorized access. It also streamlines workflows by eliminating the need for printing, scanning, and physically transporting documents, enabling efficient and eco-friendly operations. With its convenience, reliability, and heightened security, digital signing revolutionizes how we handle important documents, facilitating seamless transactions and collaborations in an increasingly interconnected world.

 

MyGov and your Notice of Assessment

If you have ticked the box in MyGov to receive ALL ATO information, please be aware that your Notice of Assessment will go directly to your MyGov account and you will be notified of recent activity via your chosen method, i.e., email or text message. A paper copy will not be sent to you by Wilson Colman. Please keep your details up to date in MyGov. You can untick this choice if you would prefer we receive your ATO correspondence.

 

Our Credit Policy

Our terms for payment are 14 days from the date of the invoice. Payment can be made by direct bank transfer, cash, EFTPOS, credit card, and cheque. When paying by direct bank transfer please use your client code as a reference so we can find your payment. Your client code is on your tax invoice.

 

Have you changed your details?

Have you changed your address, telephone number, or email address? Then we need to know. Please make sure you call our office or email us whenever your circumstances change and keep your details up to date.

If you have an ABN and your details have changed, you must notify our office within 28 days so that we can update the Australian Business Register on your behalf.

 

Do you have a Will?

By making a Will you are exercising your legal right of directing how your assets should be distributed. Only by having a Will can you be certain this will happen. When you make your own Will you also choose your executors who will manage your estate after you die. By choosing your executors carefully you can ensure that those responsible for distributing your estate understand your needs and wishes and those of your family.

Without a Will, Statute Law will dictate how your assets are divided. This could produce a result that may mean hardship to your family and be contrary to your wishes. We suggest you ensure you have a Will, and it is up to date.

 

Your Privacy

Many Australians have lost millions of dollars due to tax-related scams, especially email scams and telephone calls. These can result in identity theft. Our privacy policy is in place to ensure that we continue to protect you and your personal information.

Please take time to view our website.  We offer other services from starting up a business, running a business, and bookkeeping services, to assisting you with your retirement needs.

 

DISCLAIMER: This information on this website is not advice. Clients should not act solely based on the material contained in this post. Items listed are general comments only and do not constitute or convey advice. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.