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ATO Hot Spots for 2023 – What Business Owners Need to Know

Posted 14 Jun '23

Each year the Australian Tax Office (ATO) provides taxpayers with the “hot spots” on the specific areas they will be keeping a close eye on when processing the returns for the pending tax year.

In this article, we’ll explore the ATO’s agenda items for 2023, highlighting the three hotspots subject to increased scrutiny: rental property deductions, work-related expenses, and capital gains tax (CGT). Additionally, we’ll discuss three important changes that could impact your 2023 tax returns.

Let’s dive in!

Rental Property Deductions

The ATO has flagged rental property deductions where mistakes are common. If you’re a landlord, it’s crucial to ensure you claim only legitimate expenses and maintain proper records.

For example, the ATO pays special attention to claims on loan interests where the loan may have been totally or partially used for personal purchases such as a new vehicle, travel expenses, home improvements, personal spending, etc. This extends to re-draws, loan splits or re-financed loans where you might group together a personal car and investment property and take security over the investment property. Where the original purpose of the funds is not for the investment property, this cannot be claimed against said property.  To avoid potential audits, accurately document and only claim expenses that are genuinely incurred for your rental property.

Work-Related Expenses

For both business owners and employees, claiming work-related expenses is a pivotal aspect of maximising deductions. However, it’s equally vital to maintain diligent record-keeping and claim only legitimate expenses.

The ATO has identified work-related expense claims, such as car expenses, travel, and home office deductions, as an area of focus. By keeping accurate records and adhering to ATO guidelines, you can avoid potential scrutiny and ensure your deductions are valid.

Please keep in mind that the method for claiming working-from-home deductions has changed this year. Keep reading to learn more or find the full ATO Update here.

Capital Gains Tax (CGT)

Investors should take note that CGT has moved to the top of the ATO’s laundry list. It’s important to accurately report capital gains and losses from transactions involving cryptocurrencies, property, and shares. The ATO aims to ensure that taxpayers are appropriately complying with CGT regulations.

By keeping thorough records and seeking professional advice when needed, you can navigate the complexities of CGT and fulfil your tax obligations effectively. As some of the best accountants in Brisbane, we invite you to contact us to ensure you are accurately complying with your CGT requirements.

Key ATO Tax Changes for 2023

This year, there are three significant changes that may impact your tax return. In addition to understanding the changes, it’s necessary to consult a tax professional each year to ensure you are accurately fulfilling your tax obligations.

Removal of Self-Education Expenses

Now, you can claim the full amount of your eligible work-related self-education expenses without subtracting the $250 threshold. This is fantastic news for those investing in their professional development, as it allows you to receive more significant tax deductions.

Moreover, these changes also apply to the Fringe Benefits Tax (FBT) year, starting from April 1, 2023. Employers providing self-education benefits to their employees no longer have to consider the $250 non-deductible threshold for calculating the taxable value of those benefits for FBT purposes.

Working from Home

If you’ve been working from home, we’ve got some updates on how you can claim deductions for your expenses. There’s a new and improved method called the revised fixed rate method. Starting from July 1, 2022, you can claim $0.67 for every hour you spend working from home.

The revised fixed rate method does bring some perks. The rate per hour you can claim has increased. However, it is all-inclusive so considers electricity & gas, phone & internet, computer consumables and stationery. Claims for depreciating assets though can still be made separately.  The ATO has also accepted that not all people will have the space to have a dedicated home office, so if you work from the couch or kitchen table, you are good to go with this claim now!

If using this method though from 1 March 2023 you must have a record of the total number of hours you worked from home (timesheets, diary, rosters) as well as evidence you incurred the expense (ie. Phone or electricity bills).

If the fixed rate method isn’t your thing, you have another option—the actual cost method. This hasn’t changed this year so it is the same old rules of needing to keep all receipts and diary log of evidence of usage and we claim the work related portion of each.

Low- & Middle-Income Tax Offset

The low and middle-income tax offset (LMITO), which provided tax relief for individuals with low to middle incomes, ended on June 30, 2022. Unfortunately, it is no longer available for the current income year of 2022-23.

Stay Informed of ATO Tax Changes

Staying informed about the ATO’s focus areas and changes in tax regulations is vital for anyone who files an income tax return. As technology improves, the ATO’s ability to monitor and review tax returns becomes more efficient.

Therefore, ensuring accurate substantiation for deductions and compliance with ATO guidelines is vital to avoid penalties and audits. Our team at Empire Accountants is here to guide you through these changes. Reach Out to us for expert assistance tailored to your specific needs, and stay ahead of the curve as we help you navigate the changing landscape of taxation in 2023!

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