A new tax year awaits us all…

Tax accountants have a very unique business, in that we work very hard each year to keep everyone compliant, and amazingly it all happens again the following year. All thanks to our still growing and even more complicated annual taxation system that we have here in Australia.

So with the new 2022/23 tax season about to land on our doorstep here in Wodonga, a few quick snippets and tips that all our loyal clients should be aware of:

1. The superannuation guarantee rate rises to 11% on 1st July 2023 (up from 10.5%) – make sure the employment payroll software reflects this change. And consider paying any employee super owing before year end to bring forward this tax deduction.
2. Over 10 million Australians will likely receive a lesser tax refund this year as a prior year tax break offset (called LIMITO) is no longer adding to these tax refunds.
3. The car kilometer claim rate increases up to 78c (up from 72c) when claiming up to 5,000kms.
4. Remember to count your inventory or livestock numbers and note down any odometer readings on vehicles as of Friday 30th June 2023.
5. Annual payroll should be reconciled and the STP finalisation submitted to the ATO by 14th July 2023. TPAR reports need to be submitted by 15th August 2023.
6. A bonus deduction of 20% could be claimed on eligible business costs to support digital adoption such as portable payment devices, cyber security systems, and subscriptions to cloud-based services. This includes costs from 29th March 2022 to 30th June 2023.

A few more articles are attached regarding the big changes regarding working from home claims, rental property data matching, electronic vehicles tax breaks, and recent 23/24 Federal Government Budget announcements that may affect us all in years to come.

See you all at the Kitchen Bench (for another year once again)…

The Team at Lidgerwoods

SOPHIE, MARC, SHARON, LOUISE, DAVID, JACOB, DARCY & KYLIE

Significant change to claiming working from home expenses

Before 1 July 2022, an individual taxpayer that incurred additional deductible expenses as a result of working from home, had a choice of three methods to claim these expenses.
These choices were:

• The shortcut method – which was available from 1 March 2020 to 30 June 2022;
• The fixed-rate method – which was available from 1 July 1998 to 30 June 2022; or
• Actual expenses, that is calculating the actual expenses incurred as a result of working from home (Editor: This method can be burdensome to apply in practice)

From 1 July 2022, as a result of the release of PCG 2023/1 by the ATO, the shortcut method and the fixed-rate method have been abolished.

A replacement method that can be used instead of the actual expenses method (which has not been abolished) is the revised fixed-rate method.

Under the revised fixed-rate method, a deduction can be claimed of 67 cents per hour for energy expenses (electricity and gas), internet expenses, mobile and home phone expenses, and stationery and computer consumables.

Other expenses associated with working from home, such as depreciation of home office furniture and a personally owned computer used at home for work purposes, will need to be calculated on an actual basis when using the revised fixed-rate method.

To claim a deduction under the new fixed-rate method, an individual needs to meet three criteria, which are:

• The individual is working from home while carrying out their employment duties or carrying on their business on or after 1 July 2022;
• They are incurring additional running expenses of the kind outlined in the above discussion as to what the 67 cents per hour amount reflects, as a result of working from home;
• They keep and retain relevant records in respect of the time they spend working from home and for the additional running expenses (covered by the rate per hour) they are incurring.

There are strict record keeping requirements associated with this new method.

For the year ending 30 June 2023, a taxpayer using this new method will need to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023.

The taxpayer will also need to keep a record of the total number of actual hours they worked from home for the period 1 March 2023 to 30 June 2023.

The record of the actual hours worked from home could be maintained by timesheets, rosters, time-tracking apps, logs of time spent accessing employer systems or online business systems, or a diary kept contemporaneously (daily, no back dating allowed).

For the year ending 30 June 2024 and later income years, a taxpayer using this method must also keep a record of actual hours worked from home for the entire year.

Under both the short-cut method and the previous fixed-rate method, there was no need for detailed record keeping of the actual hours worked from home. Estimates were acceptable. This is a significant change and increases the record keeping burden on taxpayers.

Another significant change, which results in an increase in record keeping obligations under the revised fixed-rate method, is that in relation to running costs such as energy costs, phone and internet costs, a taxpayer needs to maintain at least one monthly or quarterly bill.

This is because the ATO now requires proof that the individual has incurred the running costs represented by the 67 cents per hour deduction.

Editor: If you have worked from home during the 2023 year, please consider these big changes prior to having us complete your tax return this year, or contact us beforehand to discuss your situation and how you substantiate your hours and claims.

FBT exemption for electric cars

Until recently, the FBT consequences for providing electric cars to employees were effectively the same as any other car. However, from 1 July 2022, FBT is no longer payable on benefits provided for eligible electric cars and associated expenses. Practically, this exemption will be relevant for the first time in the 2023 FBT year.

Broadly, benefits provided for electric cars will be exempt from FBT where the following criteria are met:

• the car is a zero- or low-emissions vehicle;
• the first time the car is both held and used is on or after 1 July 2022;
• the car is used by a current employee or their associate(s) (e.g., a family member); and
• luxury car tax has never been payable on the importation or sale of the car.

Registration, insurance, repairs, maintenance and fuel expenses provided for eligible electric cars are also exempt from FBT.
Note that, while the benefit is exempt from FBT, the taxable value of the benefit must still be determined when working out whether an employee has a reportable fringe benefits amount to be included on their income statement or payment summary.

Editor: Please contact our office if you have any queries about this new exemption and how it may affect your obligations for the 2023 tax year. If you are providing these vehicles to employees you need to include the Reportable FB amount on the employees annual PAYG Summary for 2023. 

Residential investment property loan data-matching program

The ATO has advised that it will acquire residential investment property loan data from authorised financial institutions for the 2021/22 through to 2025/26 financial years, including:

• client identification details (names, addresses, phone numbers, dates of birth, etc);
• account details (account numbers, BSBs, balances, commencement and end dates, etc);
• transaction details (transaction date, transaction amount, etc); and
• property details (addresses, etc).

The ATO estimates that records relating to approximately 1.7 million individuals will be obtained each financial year.
The principal uses of the data include “education and online services” and “data analytics and insights”, as well as to help the ATO “identify relevant cases for administrative action, including compliance activities”.

The ATO has a dedicated webpage dealing with its data-matching protocols (currently 24 in total). It states on this webpage that: “Matching external data with our own helps us to ensure that people and businesses comply with their tax and super obligations. It also helps us to detect fraud against the Commonwealth.”

Editor: The data-matching capabilities of the ATO are increasing on an almost daily basis, and we expect this information to be visible on client’s ATO Prefill reports in due course, together with information sourced from rental property agents, so please ensure the data you provide us is complete to avoid potential audits from the ATO.

2023/24 Federal Budget Update

On 9 May 2023, Treasurer Jim Chalmers handed down the 2023/24 Federal Budget.

Some of the measures announced by the Government (including some which were actually announced prior to the Budget), include:

• from 1 July 2026, employers will be required to pay their employees’ superannuation at the same time as their salary and wages;
• providing businesses with annual turnover of less than $50 million with an additional 20% deduction on spending that supports electrification and more efficient use of energy (the 'Small Business Energy Incentive'); and
• increasing the capital works tax deduction depreciation rate for eligible new build-to-rent projects from 2.5% to 4% per year.

In addition to these, one of the most important aspects of this Budget was that the Government has provided some further depreciation relief for small businesses once temporary full expensing comes to an end on 30 June 2023.

Specifically, from 1 July 2023 until 30 June 2024, the Government will temporarily increase the instant asset write-off threshold for small businesses (with an aggregated annual turnover of less than $10 million) from $1,000 to $20,000. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business depreciation pool.

Also, the provisions that prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2024.

Editor: Not much really in this years budget – the government has clearly had to tighten the purse and begin to reign back much of the billions spent in the COVID years. The key takeaways are bold above.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

Lastly we welcome your feedback.  If you found this E-Newsletter very useful (or not?),
we’d appreciate your feedback either way.

'The Team' at Lidgerwoods Accountants