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Tax time 2023: lodgment period underway

The ATO has given the green light for taxpayers with uncomplicated financial affairs to lodge their returns. It says that the information it collects from employers, banks, private health insurers, share registries and other institutions has now been pre-filled and is ready to go on either myTax (accessed through myGov) if taxpayers are lodging their own returns, or through tax portals of registered agents, if taxpayers are using those services.

The ATO notes that income such as amounts from rental properties, government payments, capital gains from the sale of investments, or other income from “side hustles” – in particular sharing economy platforms and any cash received for work performed – cannot be pre-filled, so will need to be manually entered. Taxpayers should note that there are multiple current data-matching programs being run by the ATO, for example in the areas of residential property and ride-sourcing, so it is important to get your income reporting right the first time this year.

Taxpayers ready to lodge their returns should also be aware of some changes this year which may negatively affect the amount of refund received, and in some cases may result in tax amounts payable. 

The first of these changes is the cessation of the low and middle income tax offset (LMITO). This offset ended on 30 June 2022 and therefore doesn’t apply to the current (2022–2023) income tax return. In the 2021–2022 income year, this offset reduced an individual’s tax payable by a maximum of $1,500 for those earning between $48,001 and $90,000.

For the currently reporting (2022–2023) income year, only the low income tax offset (LITO) is available. This is for individuals earning up to $66,667, with a maximum offset of $700 for those earning $37,500 or less. That means taxpayers earning between $66,668 and $90,000 will generally be liable for $1,500 more in tax for 2022–2023 than in the previous income year. 

The second change which taxpayers should be aware of is the new revised fixed rate method for calculating working from home (WFH) deductions. Previously, individuals could rely on using the shortcut method at a rate of 80 cents per hour worked from home, but that rate is no longer available. Individuals can now either claim a revised fixed rate of 67 cents per hour worked from home, or use the actual costs method. 

To claim using the revised fixed rate, taxpayers need to meet specific record-keeping requirements, such as keeping a work diary or having timesheets to back up the calculation of their claimed WFH hours. On the other hand, people can still use the actual costs method to deduct WFH expenses, but this requires keeping detailed records for all expenses being claimed and is a more complex undertaking.

The ATO has warned taxpayers to carefully assess their circumstances this year, as it has noted that many more people are working from home less (and therefore incurring lower WFH costs) than they did the year before. When using either the revised fixed rate method or the actual costs method for your 2022–2023 tax return, you should not simply copy last year’s calculation of your WFH hours or costs incurred.

Due to these and other changes, the ATO has advised taxpayers to remember that the initial tax estimate received from myTax or your registered tax agent may not match the final tax outcome. It recommends you wait for your finalised notice of assessment before making any plans for spending an anticipated tax refund.