June Newsletter 2023

As we are about to embark on the new financial year, we would like to bring to your attention some changes in Australian Taxation Law that might impact you. Here are the key updates:

Personal Income Tax

There are no changes to any personal tax rates or threshold in 2023-24:

$0 - $18,200 0%

$18,201 - $45,000 19%

$45,001 - $120,000 32.5%

$120,001 - $180,000 37%

$180,001 and over 45%

The following changes have come into effect:

· The Low-to-Middle-Income Tax Offset (LMITO) was set to end on 30 June 2022 by the previous Liberal government, and the current Labor government has stuck to that and confirmed that they have no intention to extend it. As a result, low-to-middle-income earners may see their tax refunds reduced by between $675 and $1,500 (for incomes up to $90,000 and phasing out $126,000).

· The Medicare levy low-income threshold for singles has increased to

$24,276 for couples with no children to $40,939 and the entry for each independent child to $3,760.

· The Government has amended the law to remove the $250 non-deductible

the threshold for self-education expenses from 1 July 2022.

Deductions

• Working From Home Expenses

The method to claim these expenses, and the substantiation requirements, have

changed. The Revised Fixed Rate Method allows you to claim 67 cents per

hour for the following costs:

· Data and Internet

· Mobile and home phone usage

· Electricity and gas

· Computer consumables (such as printer ink)

· Stationary

You can also claim a separate deduction for the depreciation of assets such as computers and office furniture, the repairs and maintenance of these assets, and cleaning (of a dedicated home office). You will need a diary, timesheet, or roster to record all the hours you work from home for the entire year and evidence showing that you paid for the related expenses.

Alternatively, you can claim using the Actual Cost Method, whereby you must keep receipts for every expense you claim. You can work out your work-related expenses over a 4-week period that shows your work use using a diary or itemised bill.

Motor Vehicles

You can use a logbook or diary to record private versus work-related travel, including trips between workplaces or to perform your work duties. Please note that travelling between your home and workplace is considered personal use. If

your work-related travel is likely to be less than 5,000 km for the year; it is best to keep a diary of that travel and claim the cents per km method. If it is greater, then it is best to keep a logbook and keep receipts for:

· Fuel & oil

· Insurance & Registration

· Loan interest or lease payments

· Repairs and servicing

We will calculate the method that will give you the greatest deduction.

Other Deductions

To claim a deduction, an expense must be work-related; you must have spent the money and have not been reimbursed, and you must have receipts or records of your expenses. Examples of costs you may be able to claim to include fees for parking and tolls; tools, computers, and items you use for work; clothing and items you wear at work if they are occupation-specific, a distinctive uniform, or protect you from the real and likely risk of illness or injury while working; attending seminars, conferences, or other training courses connected with your work; union fees, subscriptions to associations related to your work, professional memberships, and working with children checks; donations to organisations that have the status of a deductible gift recipient (DGR); income protection insurance; and the cost of managing your tax affairs.

What you cannot claim (except in very limited circumstances) includes the cost of personal grooming or cosmetics; gym fees or fitness-related expenses; vaccinations; watches; relocation costs to transfer or relocate for work purposes; and GoFundMe donations.

Small Business

The instant asset write-off, which is $150,000 for the 2022-23 year, reduces to $20,000 per asset for the 2023-24 year. Small businesses (those with an aggregated turnover of less than $10m) can deduct the full cost of eligible assets costing less than $20,000, providing they are installed and ready for use between 1 July 2023 and 30 June 2024. The threshold applies per asset, so multiple purchases can be written off if you choose.

There is currently a lodgement penalty amnesty for small businesses with outstanding tax and BAS returns, where failure to lodge penalties will be removed if they are lodged between 1 June 2023 and 31 December 2023. The amnesty relates to returns due between December 2019 and March 2022.

To claim a deduction for Superannuation payments for the June quarter, they must be submitted by 14 June to ensure they reach the fund by 30 June. STP finalisation must be completed by 31 July, as well as Taxable Payments Annual Reports.

Employers, please be aware that the Superannuation Guarantee Rate is increasing from 10.5% to 11% on 1 July 2023. Please check your payroll software to ensure this increases in your first pay run in July

Superannuation

Suppose you have contributed to your superannuation and would like to claim a tax deduction. In that case, you need to send a Notice of Intent to Claim a Deduction to your Superannuation Fund and receive an acknowledgement back from them before lodging your return.

From 1 July 2026, employers must pay their employees’ superannuation guarantee entitlements on the same day they pay salary and wages. Currently, employers are only required to pay quarterly. You will need to ensure that you have the appropriate software in place to cope with this change.

From 1 July 2025, the Government will reduce the tax concessions available to individuals with a total superannuation balance exceeding $3 million. The tax rate on earnings on the proportion over $3m will be taxed at 30%, up from the current 15%

ATO Targets for 2023

For the 2023 income year, the ATO will continue to increase its compliance activities with individual taxpayers. The areas that are likely to receive greater attention from the ATO include the following:

· Car expense claims under the log-book method, focusing on identifying log-book records that do not comply with legislative requirements.

· Claims for ‘workhorse’ vehicles (vehicles that do not qualify as a car), the ATO has become increasingly concerned about claims for these vehicles based on 100% work-related or business use.

· Cryptocurrency losses, with values recently plummeting, the ATO will be paying closer attention to individuals utilising losses from the disposal of cryptocurrencies.

· Asset disposals that generate losses (wash sales), the ATO will look at disposals at close to year-end that increase capital losses or allowable deductions to reduce capital gains or assessable income.

· Spotlight on rental properties, the ATO has significantly increased its audit focus on rental properties, identifying several common errors, including the incorrect treatment of purchase-related costs; inaccurate claims for interest expenses, including shares not being correctly apportioned; the incorrect classification of improvements as deductible repairs; and excessive claims concerning holiday homes and similar properties.

Tax Returns 2023

To lodge your tax return for 2023, we will need to ensure that your Income Statement is finalised. Employers have until 31 July 2023 to finish them, and you can check on your MyGov account whether yours is completed. We offer multiple channels to enable your return to be completed, such as in-person meetings, phone calls, or email. Our service will ensure you maximise your deductions, minimise tax liabilities, avoid ATO penalties, and receive accurate and reliable tax advice. Individual tax return appointments are available from 1 August 2023; however, you are welcome to email or drop your records in before that date, and we will complete your return as soon as we have all the necessary information and your Income Statement is finalised.

Our partners, Kerryn Gooding and Natalie Davies, are both highly qualified FCPAs with many years of experience in tax and accounting. They are constantly updating their knowledge and skills so that you receive the best advice. You will receive personalised service, timely responses, and expert advice.

Scams

Be very wary of any contact that appears to be from the ATO where they are demanding payment or seeking your bank account details, personal details, or tax file number. If you are concerned, hang up and call our office.