Tax year-end Australia: what’s the ATO’s focus this year?

This article was current at the time of publication.

The 2022-23 financial year-end is fast approaching, and it’s prudent to not only be across recent tax changes but also the priority focus areas of the Australian Taxation Office (ATO).

Among other things, the ATO will be focusing on record keeping, work-related expenses, rental property income and deductions, as well as capital gains from crypto assets, property and shares.

As a reminder, recent changes to tax laws mean that non-deductible rental expenses include depreciation on second-hand assets and travel expenses related to residential rental properties.

Now is a good time for all tax practitioners to prepare for the looming tax season to avoid overburdening.

SW Accountants & Advisors Partner and Tax Director, Daren Yeoh FCPA, provided the following information on changes to tax laws that were announced during the current financial year.

Low and middle income tax offset (LMITO)

The treasurer announced in October 2022 that the LMITO will not be extended for the 2023 financial year. This should be factored into tax assessment estimates.

Working from home (WFH) expenditure

PCG 2023/1 was introduced in February 2023 to assist taxpayers calculate their working from home deductions. The shortcut method, which allowed taxpayers to claim WFH deductions of 80 cents for each hour they worked from home, is no longer available. 

Taxpayers will now need to apply either the reduced fixed rate method (67 cents per hour) or the actual expense method. It is expected WFH deductions may reduce for most individuals and documentation requirements may increase as individuals will have needed to keep a diary or roster of days when they worked from home. The ATO will not accept general estimates of WFH hours.

Trust distribution resolutions

When acting for trusts, it is important that trustee resolutions outlining the distribution of income be signed before 30 June. This allows for beneficiaries to be assessed on their share of the trust’s net income. Otherwise, the trustee could be assessed on that income at the top marginal tax rate.

Section 100A and Division 7A

The operation of section 100A of the Income Tax Assessment Act 1936 has become an important area of focus for the ATO.

Practitioners will need to have a greater understanding of their clients’ arrangements post distributions to ensure clients are complying with section 100A. It’s vital that plans for dealing with unpaid present entitlements are decided at the time of the distribution and that the trustee and beneficiaries document the plan.

Further, shareholder loans including any corporate beneficiary unpaid present entitlements should be reviewed and if required, a Division 7A compliant loan agreement put in place and minimum loan repayments made.

Significant global entities 

For practitioners acting for multinational groups, it’s important to consider whether the entity in Australia (no matter how small or large) is a significant global entity (SGE). An SGE is broadly an entity that is part of a global accounting consolidated group with an accounting turnover of $1 billion or more. SGEs have additional reporting and lodgement requirements. 

Also, SGEs are subject to large SGE penalties for any failure to lodge every tax form with the ATO by the due date.

Temporary full expensing (TFE) 

TFE provisions will end from 1 July 2023 and taxpayers will be required to make a record of their depreciable assets for the assets’ effective lives as determined by the commissioner of taxation or undertake a self-assessment.

For any upcoming capital purchases before 30 June 2023 – to the extent possible –  taxpayers should ensure the assets are installed and ready for use before 30 June 2023.

Technology investment boost and skills and training boost 

Small businesses with an aggregated turnover of less than $50 million can claim an additional 20 per cent bonus deduction for:

• Expenditures incurred for their digital operations or digitising their operations and depreciating assets such as portable payment devices. An annual cap of $100,000 applies.
• External training provided to their employees

Practitioners should consider checking with eligible clients whether they incurred the above expenses during the year.

Taxable payments annual report (TPAR)

For individuals providing ride-sharing or accommodation services, it’s important to be aware that electronic platform operators will soon be required to provide information on transactions made through the platform to the ATO – from 1 July 2023 for ride-sourcing or short-term accommodation services, and from 1 July 2024 for all other reportable transactions. The ATO will be expecting taxpayers to declare such income in their tax returns.

Tax planning for SMEs module

CPA Australia has produced an eLearning module, Tax Planning for SMEs, which enables practitioners to provide value-adding support to business owners in identifying, explaining and applying tax planning options for SMEs. Access the module here.

Need more? Check out the full set of CPA Australia 2023 year-end tax resources.

Keep an eye on these:

Fringe benefits tax updates

The 2023 FBT year ended on 31 March, and any business with a tax liability must lodge an FBT return and make payment by 22 May 2023. This deadline includes tax agents making lodgments on paper.

Businesses using a tax agent to make electronic lodgments have until 26 June 2023.

Electric vehicle discount

A car benefit will be exempt from FBT where the car is a zero or low emissions vehicle, was first held and used on or after 1 July 2022, and had an initial retail price below the luxury car tax threshold for fuel-efficient cars.

FBT record keeping

Following a review of record keeping requirements last year, proposed changes to the travel diary and relocation transport records were released, and the ATO has now issued four draft instruments for consultation concerning:

• overseas employment holiday transport
• travel to an employment interview or selection test
• remote area holiday transport 
• car travel for a work-related medical examination, work-related medical screening, work-related preventative health care, work-related counselling or migrant language training.