Deductions every individual should be discussing with their tax consultant this financial year
30 March 2023
Working with a tax consultant to take advantage of various tax-planning opportunities is a strategy that can help optimise your tax position and ensure you make the most of the tax deductions available to you.
To help you understand the types of opportunities you should be discussing with your tax consultant this income year, we’ve compiled a list of tax planning items that may be relevant to you. To be able to claim for any of these items, you must have purchased the item yourself for income producing purposes, have not been reimbursed, and you must also have a receipt to substantiate your claim.
Home office expenses
If you are an employee and worked from home during the year, you may be able to claim a tax deduction for home office expenses. There are two methods to choose from:
1. Revised fixed rate method
For periods from 1 July 2022, you can claim a rate of 67 cents per hour, which encompasses electricity and gas, phone and internet expenses, stationery and computer consumables. You cannot separately claim a deduction for these costs when using this method. However, you can claim a deduction for the decline in value of office furniture and computer equipment used in your home office.
You do not need to maintain a separate home office or dedicated work area at home to use this method.
To apply the revised fixed rate method, you must:
Work from home while carrying out your employment duties or carrying on your business on or after 1 July 2022;
Incur additional running expenses that this method covers (such as electricity and gas, or phone and internet expenses), which are deductible as a result of working from home; and
Maintain a record of the total number of hours you work from home and keep at least one document for each of the additional expenses you incur while working at home.
Note: The previous fixed rate method of 52 cents per hour applied to periods between 1 July 2018 to 30 June 2022. It encompasses electricity and gas, cleaning and the depreciation of office furniture. Under the previous fixed rate method, you could separately claim the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of computer equipment.
2. Actual cost method
Claim the actual work-related portion of all your running expenses, which you must calculate on a reasonable basis.
The following must be satisfied to make a claim:
You have spent the money yourself and have not been reimbursed.
The claim is directly related to earning your income.
You have maintained records to substantiate the claim such as a diary of days worked from home and copies of tax invoices.
Note: For periods between 1 March 2020 to 30 June 2022, the shortcut method was also available. Under this method you could claim a deduction for home office expenses at a flat rate of 80 cents per hour, which encompasses all home office running expenses.
Personal deductible superannuation contributions
From 1 July 2021, the concessional contributions cap increased to $27,500.
Any unused concessional caps from the previous five years, starting from 1 July 2018, can be carried forward to make additional concessional contributions. The total value of your superannuation fund account balances must have been less than $500,000 on 30 June of the previous year to be able to carry forward the unused caps.
Individuals can make additional personal superannuation contributions within these cap amounts prior to 30 June 2023 and receive a tax deduction for doing so. Whilst the contribution is assessable to your superannuation fund at 15%, it is likely that the rate of deduction for the contribution you make in your hands will be higher, thus making additional personal concessional contributions to superannuation result in an immediate tax benefit.
High income earners
An additional 15% tax on concessional superannuation contributions applies to individuals who earn more than $250,000 per annum. High income earners should consider this when contemplating whether to make additional personal superannuation contributions this year.
Spouse contributions tax offset
You may be able to claim a tax offset of up to $540 if you make a contribution to your spouse’s superannuation fund. The maximum offset is calculated as 18% of the lesser of:
$3,000, reduced by $1 for every $1 that the sum of your spouse’s assessable income, total reportable fringe benefits and reportable employer superannuation contributions for the year was more than $37,000.
The total of your contributions for your spouse for the year.
Where 10% or more of your total income comes from employment-related activities and/or carrying on a business and your income is below $42,016, you may be entitled to receive a government co-contribution of up to $500 where you make an after-tax contribution into your superannuation fund of $1,000. The co-contribution phases out once your income exceeds $57,016.
Study and training loans
If you have a study loan such as a Higher Education Loan Program (HELP) debt or a Trade Support Loan (TSL), you are required to make a compulsory loan repayment once your repayment income (taxable income plus net investment losses, total reportable fringe benefits, reportable superannuation contributions and exempt foreign employment income) reaches $48,361. As your repayment income increases, the repayment rate increases.
Motor vehicle deductions
You can claim a deduction for motor vehicle expenses where you are required to use your private car in the course of your employment duties. You cannot claim home to work travel, or if your vehicle is salary packaged (e.g. under a novated lease).
You can calculate your claim under either of these methods:
Cents per kilometre method - Claim 78 cents per km up to a maximum of 5,000 km.
Logbook method - Maintain a logbook over a period of 12 continuous weeks to determine the business-use percentage for claiming car running costs such as fuel, registration, insurance, repairs and depreciation.
Medicare levy surcharge
If your taxable income and total reportable fringe benefits exceeds $90,000 for singles or $180,000 (plus $1,500 for each dependent child after the first one) for families, and you and your dependants do not have an appropriate level of private patient hospital cover, you may be liable for the Medicare levy surcharge.
The surcharge is an additional levy on your taxable income that ranges from 1% to 1.5% depending on your income level.
Consider whether the cost of an appropriate private health insurance policy will be cheaper than paying the Medicare levy surcharge.
Low and middle income tax offset
The low and middle income tax offset is not in place for the 30 June 2023 year. When completing income tax returns for prior years, please discuss eligibility with your tax consultant.
You can claim a deduction for gifts or donations over $2 made to an organisation that is registered as a deductible gift recipient (DGR).
Note that donations to crowdfunding campaigns may not be deductible as many of these are not operated by a DGR. You can check if an entity is a DGR by searching the ABN Lookup site.
The ATO has a focus on taxpayers who have been trading cryptocurrency and non-fungible tokens (NFTs). As an investor, capital gains tax will apply if you buy, sell, swap for fiat currency, or exchange one cryptocurrency for another. The ATO has wide access to information from cryptocurrency exchanges and other financial institutions to identify taxpayers who have transacted in these assets. You should maintain documentation on your trades so that you can accurately calculate your gains and losses.
Personal protective equipment
You may be able to claim a deduction for personal protective equipment (PPE) where your job requires you to be in close physical contact with customers or clients, or your job involves cleaning premises. Items you may be able to claim include gloves, face masks, sanitiser, or anti-bacterial spray. This may be relevant to industries such as healthcare, cleaning, aviation, hair and beauty, teaching, retail and hospitality.
Deductibility of COVID-19 test expenses
Effective from 1 July 2021, COVID-19 test expenses (PCR and rapid antigen tests) incurred by an individual in gaining or producing their assessable income will be deductible. The purpose of the test must be for determining whether the individual can attend or remain at their place of work. COVID-19 tests undertaken for leisure activities and travel or for the prospect of future employment will not be deductible. You should retain copies of receipts to substantiate your claim.
While not exhaustive, this tax planning list gives you an idea of the scope of opportunities your tax consultant can discuss with you. To help ensure you are able to make the most of these tax planning opportunities, talk to your adviser or get in touch with our tax consultants to discuss how you might be able to minimise your tax exposure.