The Australian Tax Office (ATO) has provided important updates for tax agents to consider regarding their clients’ 2023 tax returns. These changes will impact both individual and company tax filings. Tax agents are advised to familiarize themselves with these alterations and understand their potential impact on their clients’ returns.
For individual tax returns, the ATO highlighted three significant modifications that could affect clients’ 2023 returns. The first change involves the elimination of the self-education expenses threshold. The $250 non-deductible threshold has been removed for the 2022–23 year, including the fringe benefits tax year starting on April 1, 2023. While this change reduces compliance costs for individuals claiming self-education expenses, they still need to report these expenses under their Individual Income Tax Return. However, there is no longer a non-deductible category. Tax agents are reminded to ensure that clients maintain records of their deductible self-education expenses. Additionally, the ATO clarified that clients no longer need to keep records of non-deductible self-education expenses that were previously offset against the $250 threshold.
The ATO also cautioned accountants about the revised fixed rate method for individuals working from home. The updated method sets the rate at 67 cents per work hour. This change allows individuals to increase the claimed rate per work hour when working from home, modify the record-keeping requirements, and eliminate the need for a dedicated home office for work purposes. Individuals who opt not to use the revised fixed rate method must utilize the actual costs method, as the shortcut method is no longer available.
Furthermore, the ATO reminded clients about the conclusion of the low and middle-income tax offset. This change may result in lower-than-expected refunds or even tax bills for clients. However, the low-income offset (LITO) remains available for taxpayers with a taxable income of $66,667 or less, providing a maximum offset of $700 based on their taxable income. Additionally, the ATO informed accountants that clients’ returns may appear different this year because the Tax Office has resumed offsetting any credits or refunds to pay off pandemic-related debts that were previously deferred.
Regarding companies, the ATO reiterated changes applicable to their tax returns. Small businesses with an aggregated turnover of less than $50 million can now claim temporary boosts. One such boost is the temporary skills and training boost, which offers an additional 20% deduction for eligible external training courses provided to employees by registered training providers in Australia. This boost applies to expenditures incurred from 7:30 pm (AEDT) on March 29, 2022, until June 30, 2024. Additionally, eligible small businesses can claim the temporary technology investment boost, allowing for an extra 20% discount on eligible expenditure and depreciating assets related to digital operations or digitizing operations. This boost permits a deduction of up to $20,000 per income year for eligible expenditures of up to $100,000 per income year incurred from 7:30 pm (AEDT) on March 29, 2022, until June 30, 2023.
The ATO also reminded accountants about an amendment to the Income Tax Assessment Act 1997, which categorizes distributions funded by capital raising as unrankable. According to the ATO, a distribution by an entity is considered funded by capital raising if it deviates from the entity’s established practice of regularly making such distributions, if there has been an issue of equity interests in the entity or another entity, and if it is reasonable to conclude that the principal effect of issuing any of the equity interests was to directly or indirectly fund some or all of the distribution.
Lastly, the ATO informed accountants that interest on eligible early payments will be automatically refunded to clients, eliminating the need for clients to claim a refund to retrieve it.