Individual Tax Planning – 2023
Individuals / Investors / Trusts
- Pay any super contributions intended for the 2023 year by 23 June, or 14 June if using Xero (so they are cleared to the superfund account by Wednesday 30 June. You will need to subtract from the threshold any employer superannuation (including super guarantee) that would have been physically paid to your respective funds in the 2023 financial year when calculating the remaining concessional cap of $27,500.
- You are able to claim a full deduction for eligible personal super contributions you make to your superfund, and you do not need to do this through salary sacrifice, even if you receive employment income.
- Make sure your motor vehicle log book or work-related travel diary is up to date to substantiate any work related expenses deductions. If you claim a tax deduction for work related motor vehicle expenses, you should note your odometer records at 30 June each year so that you can calculate the kilometres travelled. Maintaining a logbook of work-related use of your vehicle will usually maximise the tax deduction you can claim. If your current logbook is 5 years old you will need a new one for a continuous 12 week period.
- Tax rates for FY2023 will remain the same as FY2024, with the Stage 3 tax cuts as legislated by the previous Government, due to commence from 1 July 2024 for FY2025 onwards.
Other recent changes to legislation applicable to this financial year:
Deduct work-related expenses
- Taxpayers who are over-claiming work-related expenses (e.g. vehicle, travel, internet and mobile phone and self-education) are on the ATO’s hit list.
- Although a myriad of tax law considerations is involved when claiming work-related expenses, the three main rules are:
- Only claim a deduction for money actually spent (and not reimbursed);
- The work-related expense must directly relate to the earning of income; and
- You must have a record to prove the expense.
Working from home deductions
- The Australian Tax Office (ATO) has announced changes to the way taxpayers claim working from home deductions for the 2022-23 income year and onwards, with alterations to the deduction rate and the method of recording work from home hours.
- The revised rate method applies from 1 July 2022 and can be used when calculating deductions for 2022-23 income tax returns.
- From 1 July 2022 to 28 February 2023, the ATO will accept a record which represents the total number of hours worked from home (such as a 4 week diary). However, from 1 March 2023, taxpayers will be required to maintain a record of the total number of hours in which they worked from home.
- You can claim a deduction of 67 cents for each hour you work from home, as a representation of all additional deductible running expenses as a result of working from home. However there are still some record keeping requirements.
- The shortcut $0.80 per hour method, which was introduced during the pandemic, has ceased as of 30 June 2022.
- Both employees and self-employed individuals can claim a tax deduction annually to a maximum of $27,500 for personal superannuation contributions, provided the superannuation fund has physically received the contribution by 30 June 2023 and the individual has provided their superannuation fund with a notice of intention to claim. Employees can also top-up their employer’s superannuation guarantee contributions to the $27,500 limit.
- Payments to a superannuation fund should be made sufficiently in advance of 30 June to ensure there is time for the payment to be processed and credited to the fund’s bank account by 30 June. If it is not credited to the fund’s bank account by 30 June, the deduction will be deferred to the next income year. You must ensure that the relevant paperwork is submitted to the superfund by 30 June 2024 (usually before you lodge your FY2023 tax return) to ensure you can claim the tax deduction for any personal super contributions against FY2023 income.
- The eligibility age for the Downsizer Scheme was lowered from 60 to 55 years on 1 January 2023. The Downsizer Scheme allows eligible people who sell their home to make a one-off, $300,000 contribution to their super, outside the concessional and other rules. Couples can contribute $300,000 each.
Temporary reduction in superannuation minimum drawdown rates ends on 30 June 2023.
- The Australian Government specifies the minimum amount that needs to be drawn each year from account-based pensions and similar products, including superannuation income accounts. The annual minimum payment was halved by the Government in March 2020 in response to COVID-19, with these lower drawdown rates of 2% to 7%, extended to 30 June 2023. From 1 July 2023 the minimum rates will revert to the normal rates of 4% to 14%, depending on your age.
- The Superannuation Guarantee (SG) is the minimum legislated amount of superannuation an employer must pay an eligible employee. From 1 July 2023 the SG rate has now risen from 10.5% per year to 11% of a person’s ordinary-time earnings
- From 1 July 2022, the work test for non-concessional and salary sacrifice contributions to super for those aged 67 to 74 has been removed. Existing annual concessional and non-concessional caps will continue to apply, although the change will allow people under age 75 to use the non-concessional bring-forward rule (which currently ceases at age 67). People aged 67 to 74 will still need to meet the work test if they want to claim a tax deduction for their personal (concessional) super contribution.
- If your superannuation balance is below $500,000 as at the previous 30 June, you can contribute more to superannuation than the annual $27,500 deductible contribution cap, where your contributions in prior years were below the concessional contribution cap of that year. Employer contributions are counted for this purpose, and there are contribution and timing limits. You can carry forward unused concessional contribution caps for 5 years from FY2019. Any unused caps from FY2019 that are not used by 30 June 2024 will be lost after that date.
No extension to Low and Middle Income Tax Offset
- There was no extension of the Low and Middle Income Tax Offset announced, past 30 June 2022 – so the FY2022 tax return is the last you will see of that offset. In FY2023, someone earning between $48k to $90k will lose $1,500 in tax credits/refunds compared to FY2022.
Eligibility expanded for down-sizer super contributions
- The eligibility for making down-sizer contributions to superannuation will be expanded by reducing the minimum age from 60 to 55. The downsizer contribution allows an individual to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home, where certain conditions are satisfied. Both members of a couple can contribute and the contributions do not count towards non-concessional contribution caps. The measure will take effect from the start of the first quarter after Royal Assent of the enabling legislation.
Elimination of $250 Self-Education Expenses Threshold
- The first $250 of self education expenses was previously non-deductible. This threshold has been removed as of 1 July 2022.
First Home Super Saver Scheme
- A first home buyer can salary sacrifice a maximum of $15,000 a year (take care not to breach the $27,500 concessional contributions cap) to save for a deposit to buy a first home.
- The maximum amount that can be saved in such a way is $50,000 across all years. Provided the buyer’s partner does not already own his or her first home, the couple can put in a maximum of $100,000 ($50,000 x 2) to buy a first home.
- Money saved in this way can only be withdrawn from the superannuation fund with strict rules applying on how to use such withdrawn money (e.g. must buy a home within a certain time and the ATO must be notified of the withdrawal).
- Withdrawn funds are subject to income tax withheld at your marginal rate, less a 30% offset. The amount withdrawn must be included as assessable income in your income tax return for that year, along with the tax withheld.
We welcome your call to discuss tax planning for you individually as well as your business.