Tax Time 2023: lodgment period underway
With only a little more than a month into tax time, the ATO has given the green light for taxpayers with uncomplicated financial affairs to lodge their tax returns.
The ATO says that the information it collects from employers, banks, private health insurers, share registries and other institutions has now been prefilled and ready to go on either MyTax if taxpayers are lodging their own returns, or through tax portals of registered agents, if taxpayers are using those services.
The ATO notes that income such as rent from rental properties, government payments, capital gains from the sale of investments and property, or other income from “side hustles” in particular, sharing economy platforms, or any cash received for work performed will need to be manually entered into tax returns.
Taxpayers should note that there are multiple data-matching programs being run by the ATO in the areas of residential property and ride-sourcing, so it is important to get it right the first time this year.
This year's changes affecting your tax
Taxpayers ready to lodge their returns should also be aware of some changes this year which may reduce the amount of their tax refund and in some cases, may in fact result in tax payable.
No more LMITO
The first of these changes is the cessation of the Low and Middle Income Tax Offset (LMITO). This offset ended on 30 June 2022 and therefore does not apply to the current income year tax return (i.e. 2022-23).
In the 2021-22 income year, this offset reduced a taxpayer’s tax payable by a maximum of $1,500 for those earning between $48,001 and $90,000.
For the 2022-23 income year, only the Low Income Tax Offset (LITO) is available for those earning up to $66,667, with a maximum offset of $700 for those earning $37,500 or less.
This means that taxpayers earning between $66,668 and $90,000 will generally be liable for $1,500 more in tax than in the previous income year.
Work from home deductions
The second change which taxpayers should be aware of is the new revised fixed rate method for claiming work from home (WFH) deductions.
Previously, taxpayers could use the shortcut method at a rate of 80 cents per hour.
This is now no longer available and taxpayers can either claim a revised fixed rate of 67 cents per hour or use the actual costs method.
To claim this new fixed rate, taxpayers will also need to meet specific record keeping requirements.
Taxpayers are still able to use the actual costs method to claim WFH expenses, but it involves keeping detailed records for all expenses being claimed and is more complex than using the revised fixed rate.
Just with this small change alone, a hypothetical taxpayer working 3 days a week from home for 8 hours per day over 49 weeks will only be able to claim a deduction of $787 in their 2022-23 tax return compared to $940 that they would have been able to claim under the previous shortcut method.
In addition, the ATO has warned taxpayers to carefully assess their circumstances this current tax year as it has noted that many more people are working less from home than the year before.
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Tax refund or tax payable?
Due to these and other changes, the ATO has advised taxpayers that the tax estimate from MyTax or their registered tax agent may not match the final tax outcome.
The ATO recommends taxpayers wait for their notice of assessment before making any plans about how to spend their tax refund.
This is no doubt to reduce the disappointment that many have experienced about the size of their tax refund (or even having tax to pay) either firsthand or by hearing about it on social media.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.