End of Financial Year 2023
FEDERAL BUDGET 2023-2024
PERSONAL INCOME TAX MEASURES
Personal Tax Rates
The Government did not announce any personal tax rate changes for the 2023 and 2024 income years. The rates therefore remain as follows:
| Individual (Residents)Tax Rates for 2022/23 and 2023/24 | |
| Taxable Income | Tax on Income (plus Medicare Levy) |
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 19c for each $1 over $18,200 |
| $45,001 – $120,000 | $5,092 plus 32.5c for each $1 over $45,000 |
| $120,001 – $180,000 | $29,467 plus 37c for each $1 over $120,000 |
| $180,001 and above | $51,667 plus 45c for each $1 over $180,000 |
The Stage 3 tax cuts previously legislated are set to commence from 1 July 2024. This change will lower the 32.5% marginal rate to 30% and cover a larger tax bracket of $45,000 to $200,000 before the 45% rate kicks in.
Low and Middle Income Tax Offset (LMITO)
The Budget did not announce any extension of the LMITO beyond the 2021-22 income year. It has now ceased from 1 July 2022. This will impact millions of taxpayers who face an effective tax increase of up to $1,500 that will hit them when they lodge their 2023 tax return.
Low Income Tax Offset (LITO)
The LITO is unchanged as follows:
| Low Income Tax Offset for 2022/23 and 2023/24 | |
| Taxable Income | Amount of Offset |
| $0 – $37,500 | $700 |
| $37,501 – $45,000 | Scaled from $700 down to $325 |
| $45,001 – $66,667 | Scaled from $325 down to $0 |
| $66,668 + | $0 |
Medicare levy low-income thresholds
The Government will increase the Medicare levy thresholds for singles, families, seniors and pensioners from 1 July 2022 to ensure low income taxpayers continue to be exempt from paying the Medicare Levy. The new thresholds are as follows:
• Singles – increased from $23,365 to $24,276
• Families – increased from $39,402 to $40,939
• Single seniors and pensioners – increased from $36,925 to $38,365
• Senior and pensioner families – increased from $51,401 to $53,406
SMALL BUSINESS TAX MEASURES
Instant Asset Write-Off
From 1 July 2023 until 30 June 2024, the Government will temporarily increase the instant asset write-off threshold from $1,000 to $20,000.
Small businesses with an aggregated annual turnover of less than $10 million will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets.
* Please note that this replaces the current temporary full write-off which was extended to 30 June 2023. If you want to make use of this before it ends, the asset must be first used or installed ready to use by 30 June 2023.
SUPERANNUATION MEASURES
Super Tax Changes for Balances over $3 million
The Government confirmed its intention to implement superannuation tax changes for individuals with account balances above $3 million from 1 July 2025, including those in defined benefit schemes. However no further details were given.
Under the proposed changes, announced on 28 February 2023, individuals with total superannuation balances (TSBs) over $3m at the end of a financial year will be subject to an additional tax of 15% on earnings from 1 July 2025. Earnings will be calculated with reference to the difference in TSB at the start and end of the financial year, adjusting for withdrawals and contributions. This means that the proposed additional 15% earnings tax on an individual’s balance above $3m will operate on an accruals basis and include any notional (unrealised) gains and losses. Although most industry bodies recognise the measure is intended to ensure the super tax concessions are better targeted, there has been opposition to the method of calculation and most believe it is not fair and equitable.
Super to be Paid on Payday
From 1 July 2026, employers will be required to pay their employees’ superannuation guarantee entitlements on the same day that they pay salary and wages. Currently, employers are only required to pay their employees’ superannuation guarantee on a quarterly basis.
By increasing the payment frequency of superannuation to align with the payment of salary and wages, this measure aims to ensure employees have greater visibility over whether their entitlements have been paid and better enable the ATO to recover unpaid superannuation.
END OF FINANCIAL YEAR 2023
With 30 June fast approaching it is time to start thinking about tax and super, and what you need to or may want to do before the end of the financial year. The ATO are again focussed on some key areas this time around so we will give you the heads up on what to be aware of…
EOFY “SUPER” CHECKLIST
Contributions
- Consider topping up your concessional (before-tax) contributions (annual cap of $27,500) but ensure you complete the required documentation to validate your claim. You may also be eligible to take advantage of any “unused concessional cap carry forward” amounts if your Total Superannuation Balance is less than $500,000.
- Consider making additional non-concessional (after-tax) contributions, subject to limits. If eligible, an additional after-tax contribution may qualify you for a Government Co-Contribution of up to $500. The co-contribution phases out at incomes over $57,016.
- Consider making a contribution on behalf of your non-working or low income spouse. A minimum contribution of $3,000 may entitle you to a maximum tax offset of $540 provided the spouse’s income is less than $37,000 and completely phases out when a spouse’s income reaches $40,000.
Super Pension Payments
As part of the Federal Budget announcements in May 2023, the 50% reduction in the minimum drawdown requirement will end from 1 July 2023, so you will be required to withdraw your full minimum pension in the 2023/24 financial year. However up until 30 June 2023, the reduction still applies so please ensure that for any eligible pension including Account Based Pensions, Market Linked Pensions and Transitional to Retirement Income Streams you withdraw at least your minimum pension by 30th June 2023, otherwise tax concessions and other related exemptions may not be available.
| AGE | Minimum % from 1 July 2023 | Reduced Minimum % up until 30 June 2023 |
| UNDER 65 | 4 | 2 |
| 65-74 | 5 | 2.5 |
| 75-79 | 6 | 3 |
| 80-84 | 7 | 3.5 |
| 85-89 | 9 | 4.5 |
| 90-94 | 11 | 5.5 |
| 95 AND OVER | 14 | 7 |
BEWARE: Some super funds and super clearing houses have a cut-off date for accepting contributions to be counted towards the 2023 financial year, so check with your individual fund and/or your payroll department for their specific requirements.
If you wish to check your eligibility for any of the above contribution strategies or check your minimum SMSF pension requirement, please contact our office.
END OF FINANCIAL YEAR “TAX” TIPS
HECS/HELP Debts
Student loans such as HELP and HECS will be indexed by 7.1% on 1 June 2023. Compulsory repayments kick in when your taxable income reaches $48,361. Subject to your own personal financial circumstances you may wish to consider making extra repayments. Although there is no discount for early repayment, any payments made before 1 June will avoid the indexation. Please seek advice from your trusted advisor if you feel this may impact you.
Claiming Working from Home – Changes to the Fixed Rate
The ATO has changed the way taxpayers can claim working from home deductions. There are now two methods – the “actual cost” or the “fixed rate” method. Only the fixed rate method is changing.
The revised fixed rate method applies from 1 July 2022. You must be working from home to fulfil your employment duties, not just checking emails or taking calls. Also you must incur additional expenses as a result of working from home. You must also keep detailed records. From 1 July 2022 to 28 February 2023 the ATO will accept a 4 week diary record of working from home hours, however from 1 March 2023 you must record the total number of hours you work from home (for every day).
The fixed rate has increased from 52 cents to 67 cents per hour. It includes expenses such as electricity, phone, internet, stationery and computer consumables. In addition you will be able to claim depreciation on work related assets, repairs and maintenance of those assets You do not need to have a dedicated office space if you are using the fixed rate method.
Vehicle Logbook
Logbooks are used to record the business use of a motor vehicle and are used as evidence to claim expenses as a tax deduction. The logbook must be kept for 12 continuous weeks during the income year and are valid for 5 years unless there has been a significant change in your work travel circumstances. The logbook must contain the date, odometer reading, kilometres travelled, purpose of trip, business use percentage and details of the vehicle such as make, model and registration.
Temporary Full Expensing of Capital Assets – ending 30 June 2023!!
Business depreciating assets acquired after 6 October 2020 and before 30 June 2023 can be fully deductible in the year in which the asset is first held, used or installed. The cost of improvements to a depreciating asset can also be fully claimed in the year the improvement is made. So if you have been planning on buying a new asset for your business, you may wish to consider making use of this deduction in the 2023 income year. From 1 July 2023 the maximum write-off will be temporarily capped at $20,000 per asset.
Timing of Capital Gains Tax Asset Sales
Keep in mind that for CGT purposes a capital gain generally arises when a contract is signed and not when the sale proceeds are received. Bringing forward or deferring a sale to a different income year may have significant tax implications.
Investment Property Expenses
Depending on your personal situation, it may be helpful to bring forward certain rental property expenses such as repairs and maintenance, or speak to your lender about the possibility of prepaying loan interest up to 12 months ahead.
ATO RED FLAGS FOR 2023
The ATO has announced 3 key focus areas for this tax time:
Rental properties
Work-related expenses
Capital gains tax
Rental Properties
- Leaving out rental income (such as AirBnB)
- Overclaiming of improvements
- Not apportioning interest on loans correctly (where part of loan is used for private purposes)
Work Related Expenses
- With more people back in the office, the ATO will be checking home office expenses very closely
- Keep detailed records and receipts in case of an audit
Capital Gains Tax
- The ATO have access to records that show the sale of assets such as property, shares and cryptocurrency so will expect to see the capital gain reflected in the tax return
SCAM ALERT!!
The ATO will never call, email or text you and ask for your bank or credit card details. If you receive one from the ATO, please do not click on any links or give them any information and call us or the ATO on 1800 008 540. We can check your tax portal or contact the ATO to verify its validity.
THRESHOLDS AND CHANGES FROM 1 JULY 2023
- Super Guarantee Contribution increasing from 10.5 to 11%
- Concessional Contribution Cap staying at $27,500 p.a.
- Non-Concessional Contribution Cap staying at $110,000 p.a.
- Transfer Balance Cap for new retirement phase pensions increasing from $1.7m to $1.9m
KEY DATES
| 5 MAY | General lodgement and payment due date for all entities lodged through a tax agent |
| 26 MAY | Lodgement and payment due date for the March 2023 quarterly BAS lodged electronically |
| 5 JUNE | Extended due date for SMSF and company tax returns where non-taxable in the prior and current year
Extended due date for individual and trust tax returns with a due date of 15 May 2023 provided any liability is also made by this date |
| 30 JUNE | Last day to deposit contributions into your super fund for allocation and deductibility in 2023
Last day to withdraw your pension from your super fund and have it count towards your minimum requirement in 2023 Last day to lodge your 2022 individual tax returns if you are receipt of Child Care Subsidy and Family Tax Benefit payments from Services Australia |
| 1 JULY | Increase to Super Guarantee Contribution rate from 10.5% to 11% |
| 14 JULY | Last day for businesses to finalise 2023 STP reporting for all employees |
| 28 JULY | Due date for Super Guarantee Contributions for the quarter ended 30 June 2023 |
Please contact our office if you would like to discuss any of the topics raised in this newsletter.
Disclaimer section:
The information provided does not constitute financial or taxation advice and does not take into account your personal objectives, needs and circumstances. We recommend that you obtain personal advice from an appropriately qualified advisor or tax agent before acting on any of the information provided in this newsletter. Liability is limited by a scheme approved under the Professional Standards Legislation.