2023 Key Tax Topics

Tax Rates for 2023 are the same as 2022. The stage 3 tax cuts are due to commence from 1 July 2024.

Tax law is complicated and I can help you understand the legislation that is specific to your situation however three main rules apply to claim a deduction

1.  You must have spent the money and not been reimbursed

2.  The expense must relate directly to earning your income

3.  You must have a record to prove it

Low and middle income tax offset (LMITO)

The treasurer announced in October 2022 that the LMITO will not be extended for the 2023 financial year. This offset was available for income earners between $48,000 & $90,000 (and in part from $37,000 and phased out at $126,000). This means that where your circumstances are fairly similar you should anticipate that your 2023 tax refund will be lower than it was in 2022.

Working from home (WFH) expenditure

PCG 2023/1 was introduced in February 2023 to assist taxpayers calculate their working from home deductions. The shortcut method, which allowed taxpayers to claim WFH deductions of 80 cents for each hour they worked from home, is no longer available. 

Taxpayers will now need to apply either the new fixed rate method (67 cents per hour) or the actual expense method.

A key change is that telephone, internet and consumables are now included in the fixed rate. If you wish to claim any of these items separately then the actual method will need to be used.

The other key change is that the ATO will no longer accept general estimates of WFH hours. From 1st March 2023 full diary records will be required to claim WFH expenses.

I know that many of my clients already do this, however for those of you that use estimates or a representative record your record keeping requirements do need to change to continue to claim a deduction.

It is expected for most individuals WFH deductions may reduce and documentation requirements may increase.

Work Related Expenses (WRE) Nexus

The ATO has advised that they will be focusing some compliance resources on ensuring the WRE claims for individuals are valid. This includes demonstrating the direct connection of the requirement of the expense to be able to do your job, as well as ensuring the normal requirements of having spent the money and it not having been reimbursed. All receipts must clearly show the item details, amount paid and date purchased.

Rental Properties

The ATO has advised that they will be focusing some compliance resources on Rental Properties again this year. A particular focus is on interest claims and ensuring that the interest relates to the property purchase or expenses (not just the property security for the loan). If you have any redraws or restructure of your loan please ensure that you have full details and evidence of what the redrawn or restructured funds were used for and be aware that if there are any amounts that were not used for the property (e.g. for your personal car or holiday) then we need to apportion the interest on the loan accordingly. The ATO now has even more data matching information than previously available, the last Tax Agent update advised they now have access to some insurance information and rental platform information are they are cross-checking this data with your tax return lodgements.

“Same as Last Year” or “Standard Deductions”

There are no “Standard Deductions” in the Australian Tax Legislation and it is not acceptable to rely on last years records to make a claim. The ATO has identified that these sort of claims contribute significantly to the tax gap and as such will be review claims. Please ensure that you have adequate means to show how your claims have been made. I will ask all taxpayers to sign a declaration that they understand and have this proof.

Personal Deductible Superannuation Contributions

The Superannuation contributions cap for 2023 is again $27,500. This means that your employer, salary sacrifice and personal contributions must (in most circumstances) be within this limit. If you have contributed more than this the ATO will impose and excess contributions charge.

If you have made a personal superannuation contribution (not including salary sacrifice) and which to claim a tax deduction for these contributions please contact your superannuation fund and ensure that the tax deduction notice has been completed prior to preparation of your return. These notices need to be processed by the Superannuation Fund before your tax return is lodged. After lodgement is too late to be able to change your decision, the legislation does not allow for this.

Temporary full expensing (TFE) 

TFE provisions will end from 1 July 2023 and taxpayers will be required to make a record of their depreciable assets for the assets’ effective lives as determined by the commissioner of taxation or undertake a self-assessment.

For any current capital purchases before 30 June 2023 – to the extent possible –  taxpayers should ensure the assets are installed and ready for use before 30 June 2023.

Motor Vehicle Expenses

The cents per km rate has increased to 78c for the 2023 tax year. To claim for vehicle km you must have a record of the total work related km travelled. Please note that generally driving to and from your workplace is not deductible. If you have a large amount of work related use you will need full expenses records and a valid logbook.