Explore what’s new for tax time 2023

Garreth Hanley:
This is With Interest, a business, finance and accounting news podcast, brought to you by CPA Australia.

Elinor Kasapidis:
Hello and welcome to With Interest. I'm Elinor Kasapidis, Senior Manager Tax Policy at CPA Australia. It's the 6th of June and the end of the financial year is fast approaching, which means it's almost tax time. Over the next four episodes, we'll be talking with assistant commissioner Tim Loh from the ATO’s Individuals and Intermediary space. Welcome Tim.

Tim Loh:
Hi El, Thanks for having me.

Elinor Kasapidis:
Thanks for being with us. In today's episode, we are here to talk about what's new for tax time 2023. Let's jump straight in and start with working from home deductions. Now working from home has become the new norm for many Australians and as a result there's been quite an increase in the number of claims. The ATO recently announced some changes to the way taxpayers calculate their deductions for working from home, including an increase to the fixed rate method. Tell us about the fixed rate method, Tim.

Tim Loh:
That's right, El from the 1st of July, 2022. There are two methods available to calculate your working from home expenses. So you've got the revised fixed rate method that you mentioned before and the actual cost method. So with the revised fixed rate method, we've increased that by 28% to 67 cents per hour for every hour that you've worked from home. And it covers all your additional running expenses. So things like your energy costs, computer consumables like your printer ink. As well as internet and telephone costs. And so what we've tried to do is try and make things really easy for people to, to claim in terms of the working from home expenses. And on top of that expense you can also claim a separate deduction of expenses that are not included that rate. So things like decline in value or depreciation, in terms of depreciating assets like your laptop or office furniture.

Elinor Kasapidis:
Now that's a little bit of a shift. Now if you're using the revised fixed rate method, you'll need to have a record, won't you? So what are the record keeping requirements?

Tim Loh:
Yeah, when it comes to record keeping requirements, we've got a transitional period this year. So from the 1st of July last year to the 28th of February this year, you can use a four week representative period for the number of hours you've been working from home. But from the 1st of March of this year to the 30th of June or the end of financial year, you'll need a record for the number of hours you've worked from home. So that could be just a diary or time sheet entries, which you can get from your employer to document the number of hours you you've worked from home. The other thing you'll need is a record of one of the expenses that you might have incurred in the revised fixed rate method. So a phone or internet bill can really help there and any records for any expenses you claim that are not covered by the revised fixed rate. So you know, things like if you're trying to claim depreciation or decline in value, the depreciating assets, you'll need a record for that. So that could be the, the receipt or bill associated with that particular asset. So one example is, you know, if you bought a laptop, just the receipt there. And most people will have that because you need it to have a warranty if something goes wrong with the laptop.

Elinor Kasapidis:
So I think that there are a few people going through their diaries and collecting their bills right now. The actual cost method still remains though too, doesn't it?

Tim Loh:
Yeah that's right. So the actual cost remains. So you've got the choice to either use the revised fixed rate method or the actual cost method. And what we always say to people, records, records, records, and if you've got good records you can make the choice that works out best for you. So my advice is, you know, check out the ATO’s website, we've got some comparison calculators or speak to your registered tax agent and they can help you work out what gives them the best result for you.

Elinor Kasapidis:
Thanks Tim. And if our listeners want to learn a bit more about the revised fixed rate method, you can check out the podcast we did with Tim earlier in the year, find the link in our show notes. Now, motor vehicle expense claims are another common expense. Tell us what is the cents per kilometer rate for the 2023 income year and what records do taxpayers need?

Tim Loh:
Yeah the cents per kilometer rate for the 2022-23 income year has increased to 78 cents per work related kilometer. That's an increase from the 72 cents per work related kilomtre that was in place for previous years. Now using this method, you can claim up to 5,000 work related kilometers in the year, but you must be able to provide records that show that you own the car and how you worked out your work related kilometers. So this could be a diary or digital record and you can use something like, you know, the My Deductions tool and the ATO app to record your information there.

Elinor Kasapidis:
And I heard you say work related quite a few times because one of the challenges is that people are claiming private kilometers. Is that right?

Tim Loh:
Yeah that's right. So have you been, you know, you can't claim the travel from home to the office that's considered to be private travel and so it doesn't matter how far you live, even if you live in live in whoop whoop from the office, you can't, you can't claim that expense.

Elinor Kasapidis:
Yep. So those logbooks and those records become really important. What are other areas where people might slip up?

Tim Loh:
Look a common area where people do slip up is when they use the cents per kilometer method to make a claim and then double dip by claiming their expenses separately. So things like fuel costs, car insurance and rego. The cents per kilometer method is all inclusive, which means it already covers your decline in value, rego, insurance, maintenance, repairs, and fuel costs. So they can't be added on top of the rate when calculating deductions. You know, everyone knows you don't double dip your chip and when it comes to your motor vehicle deductions you can't double dip them as well.

Elinor Kasapidis:
Exactly. And we do have the log book method still available. So if you do do a lot of work related travel, it's up to you to decide what is the best for you or you can see a registered tax agent for advice. Now deductions are on one side of the coin, but making sure taxpayers are reporting all of their accessible income is the other. Tim, what are some of the industries or areas where income is often underreported and how's the ATO using data to prefill and cross-check returns?

Tim Loh:
Yeah, that's right El, side hustles are becoming increasingly common and it can make things a little bit tricky when it comes to tax time. A side hustle can be many things, you know, it could be a second job on top of your normal salary and wage. It might be a business that you set up or you know, activity and you're earning a little bit of extra money on the side, but if you side hustle has expanded, it's important to work out whether you are in business or not as this impacts how and what you need to declare in your tax return. Now obviously we're seeing a lot more increase in digital platforms. You know, we've seen a rise in digital based businesses, whether it's, you know, ride sharing or food delivery, whether you're a social media influencer or content creator on Instagram. While these job types and industries are increasing, the tax obligations are the same and as they are for other individuals or businesses when it comes to registrations declaring income and claiming expenses.

Elinor Kasapidis:
So if you're an Uber driver on the site on top of your regular job, you do still have to include that income in your tax return and you should probably be keeping receipts to show any expenses that you're incurring. Is that right?

Tim Loh:
Yeah, absolutely. So not only the income as you as you said El, but also the deductions as well. From our perspective at the ATO, it's all about making sure you claim what you're entitled to. Nothing more, nothing less.

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Elinor Kasapidis:
And what about the data matching activities?

Tim Loh:
Yeah, well, prefilled data will capture a lot of your income. It won't capture income for your business or some other income types. So it's really important that you're keeping track of this information. We're always looking to make sure that we are data matching wherever we can and we're obviously collecting more and more data at the ATO in that respect, but it's really important to make sure that you're on top of what's happening in the tax space and you can check out our website where we cover the latest advice and when it comes to site hustles. And we've also included information in ATO Community, which is one of our social media pages to help taxpayers get this right.

Elinor Kasapidis:
Fantastic. So don't rely on prefill to rely on your income declarations, but also be aware that the tax office does collect a lot of data after the fact and you don't want them pointing out some undeclared income a little bit later on down the track.

Tim Loh:
Yeah, I always say to people, an audit's worse than, you know, when you're a teenager your parents are cleaning up your room. It's better to, to get things right, provide all the information upfront and make sure you have those records. As I said before, you know, having those records gives you the choice of using different methods to calculate your tax return.

Elinor Kasapidis:
Brilliant. Now we have a lot of investors in Australia, small investors. What about the investment side of things?

Tim Loh:
Yeah, look, when it comes to investments, the most common income not being reported is rental income. So that's the main issue, and the main issue we see there is net income being reported and then expenses coming off the net amount. So you might have seen a lot of media lately about data matching for residential investment property loans. So we've collected data almost 1.7 million individuals. And what we're doing with that data, along with the other data matching work that we're doing is to make sure we get a complete picture of the investment properties and reduce the incorrect reporting of rental property income and expenses, which contributes over a billion dollars or 14% towards the total individuals not-in-business tax gap.

Elinor Kasapidis:
So I can sense a few landlords out there are starting to review how they're keeping their records and you do have a lot of information for rental property owners including things like apportioning, making sure properties are available for rent. The list goes on. So it's a good resource, isn't it, Tim?

Tim Loh:
Yeah, we've got these fantastic toolkits as you mentioned El, and the whole point of this is not to catch people out. We really want to kind of educate people to get it right the first time and it's incumbent both on, you know, tax agents to ask extra questions of their clients, but also for clients to provide all their records to their tax agent to make sure that they can get their tax return right.

Elinor Kasapidis:
Brilliant. Each year the tax rules change, meaning tax return results aren't always as expected. What are some of the changes for the 2023 year?

Tim Loh:
Look, there are a few changes, Elle, if you are eligible to claim a deduction for self-education expenses in this year's tax return, you can now claim the full amount. So from the 1st of July of 2022, the requirement to exclude the first $250 of certain self-education expenses has been removed. The other change that's occurring is if you have tested positive for covid 19 during the year and you couldn't earn an income because you worked in a high-risk setting. So you know, if you worked in aged care facility or hospital, you may have received a high risk settings pandemic payment from Centrelink. So if you did receive this payment, you'll need to include that manually in your tax return as it won't be pre-filled into your tax return or included in your Centrelink payment summary. Now this year the low and middle income tax offset isn't available, so we do expect refunds to be lower than expected and some people may have a tax bill this year. There are obviously a number of reasons for a lower refund, and we've got a list of those on our website at ato.gov.au/mytaxresult. And one thing to keep in mind is if you are getting behind me with your tax, don't bury your head in the sand. It's really important that you contact us so we can help you out or speak to a registered tax agent as soon as possible so we can help work together to find a solution.

Elinor Kasapidis:
And that's really important to keep up to date and if you are behind, make sure you're lodging your returns and quite often people have refunds owing to them in the individual space. And also if you're having problems paying, it's important to get in touch with the ATO.

Tim Loh:
That's right El.

Elinor Kasapidis:
Brilliant. Now let's talk about super. What's your advice for taxpayers when it comes to reviewing and managing super?

Tim Loh:
So we know a lot of people tend to set and forget their super until they're closer to a retirement, but it's really important that you're keeping track of your super from the time that you start receiving it. This year we've introduced the Super health check and while you can do the Super health check at any time. We think the best time to do it is when you're lodging your tax return. One thing to, you know, keep in mind is you can also check your Super Balance there as well. So that's another reason for downloading the ATO app. But when it comes to the Super Health Check, it consists of five simple checks. The first is just check your contact details, check your super balance and employer contributions, check for lost and unclaimed super check if you have multiple super accounts and consider consolidating those and check your nominated beneficiary. So to get started, all you need to do is jump onto your myGov account that's linked to ATO online services or as I said before, use the ATO app and if you want more information you can check out our website.

Elinor Kasapidis:
That's a really good advancement I think because a lot of people, like you say, just set and forget and we don't necessarily check if our money's going in or how we can better manage it. So kudos to the ATO for bringing that out. Now a final question for all of our tax agent listeners, the ATO have now released a new lodgement deferral function. How's this making things easier?

Tim Loh:
Yes, the new lodgement deferral function is now available in online services for agents and we work really closely with tax practitioners and professional associations to design this new function to meet their needs. Look, the new function provides a more streamlined digital process and will dramatically cut the time it takes for agents to lodge a deferral request. So you no longer need to download and complete different spreadsheets. Now the new function pre-populates information based on the client you're seeking a lodgement deferral for. The other thing it also allows you to do, is to view the lodgement deferral requests that you've submitted. So if a requests that meet agent assessed guidelines, you'll receive a response within 48 hours.

Elinor Kasapidis:
And that's great in terms of no longer needing those spreadsheets and it makes things easier.

Tim Loh:
Absolutely.

Elinor Kasapidis:
Thanks so much for your time today, Tim, and for talking us through some of the key changes for this year. Next week we'll take a closer look at some tax time issues for tradies, who often have a few extra things to think about when it comes to their tax return. If you're interested in knowing more about what we've covered today, our show notes contain links to further information on the ATO website. If you're looking for advice, speak to a registered tax agent. If you like what you've heard today, subscribe on your favourite podcast app. From all of us here at C P A Australia, thanks for listening.

Garreth Hanley:
You've been listening to With Interest, a CPA Australia podcast. If you've enjoyed this episode, help others discover With Interest by leaving us a review and sharing this episode with colleagues, clients, or anyone else interested in the latest finance, business and accounting news. To find out more about our other podcasts and CPA Australia, check the show notes for this episode. Hope you can join us again for another episode of With Interest.