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Keeping up with the latest tax updates is not just a matter of staying in the loop—it's a strategic move that can have a significant impact on your financial well-being.
As the CEO of our esteemed accounting firm, I want to ensure that we stay at the forefront of the industry. That's why we're closely following the updates from the Australian Tax Office (ATO) regarding the 2023 tax returns of our valued clients.
These updates are crucial for our knowledgeable accountants to be aware of, as they can significantly impact the tax returns of individuals and companies alike.
The ATO has emphasized several key changes that demand our careful consideration.
We diligently study these updates to provide you with expert guidance and ensure your tax returns are handled with precision and compliance.
🟠 Individuals
The ATO has highlighted three significant changes that accountants should be aware of regarding Individual Tax Returns, as these alterations can impact clients' tax returns for the year 2023.
Removal of Self-Education Expenses Threshold: The $250 non-deductible threshold for self-education expenses has been eliminated for the 2022-23 year. While individuals still need to report these expenses in their Individual Income Tax Return, the non-deductible category no longer applies. Clients should maintain records of deductible self-education expenses but are no longer required to keep records of non-deductible self-education expenses previously offset against the $250 threshold.
Revised Fixed Rate Method for Working from Home: The updated fixed rate method is now 67 cents per work hour for individuals working from home. This change allows individuals to increase their claimed rate per work hour, modify record-keeping requirements, and removes the need for a designated home office. The previous shortcut method is no longer available, and individuals must either use the revised fixed rate method or the actual costs method.
End of the Low and Middle-Income Tax Offset: The conclusion of the low and middle-income tax offset may result in lower-than-expected refunds or even a tax bill for clients. However, the low-income offset (LITO) is still applicable for taxpayers with a taxable income of $66,667 or less, offering a maximum offset of $700 based on their taxable income.
Additionally, accountants should be aware that clients' returns may appear different this year as the Tax Office has resumed offsetting any credits or refunds to settle debts that were deferred during the pandemic.
🟠 Companies:
The ATO has highlighted three significant changes that accountants should be aware of regarding Individual Tax Returns, as these alterations can impact clients' tax returns for the year 2023.
The ATO also reiterated the changes for the tax returns of companies, which included the introduction of temporary boosts for small businesses.
Temporary Skills and Training Boost: Small businesses with a turnover of less than $50 million can benefit from a bonus discount of 20% on eligible external training courses provided to employees by registered training providers in Australia. This boost applies to expenses incurred between 7:30 pm (AEDT) on March 29, 2022, and June 30, 2024.
Temporary Technology Investment Boost: Eligible small businesses can claim an additional 20% discount on eligible expenditure and depreciating assets related to their digital operations or digitizing processes. The bonus deduction can reach up to $20,000 per income year, with eligible expenditures up to $100,000 per income year. This boost applies to expenses incurred between 7:30 pm (AEDT) on March 29, 2022, and June 30, 2023.
Amendments to Income Tax Assessment Act: The ATO reminded accountants of the changes in the Income Tax Assessment Act 1997. Specifically, distributions funded by capital raising have been categorized as unfrankable. Factors indicating capital raising funding include deviations from established distribution practices, equity interest issuances, and the purpose of equity issuances directly or indirectly funding the distribution.
According to the ATO, an entity's distribution is considered funded by capital raising if:
The distribution deviates from the entity's established pattern of regularly making similar distributions.
There has been an issuance of equity interests in the entity or another entity.
It is reasonable to determine that the primary impact of issuing any of the equity interests was to directly or indirectly fund some or all of the distribution. Additionally, any entity involved in issuing or facilitating the equity interests did so with the intention of funding the distribution or a portion of it.
Accountants were also reminded by the ATO that interest on eligible early payments will be refunded to clients automatically, eliminating the need for clients to make refund claims themselves.
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