Various income tax threshold amounts, and rates increased for the 2022–23 income year. These are listed below.
Don’t forget that the Low- and Middle-Income tax offset (LMITO) is no longer available from the current income year (2022–23). The income year just ended (2021–22) was the last year for which LMITO was available, and the maximum amount was increased by $420 to $1,500. The maximum amount is available where the individual’s taxable income ranges between $48,001 and $90,000 (inclusive). Above $90,000, the LMITO phases out at the rate of 3 cents in the dollar until taxable income reaches $125,000.
There is no need to claim this offset in your income tax return. The ATO applies is automatically to eligible taxpayers. Note that the LMITO is available only to reduce the amount of an individual’s income tax liability. It is not a refundable amount and cannot be used to reduce any Medicare levy payable.
The income thresholds for Medicare levy surcharge and private health insurance (PHI) tax offset purposes (which have been frozen until 30 June 2023) are set out in the table below.
* The family income threshold is increased by $1,500 for each dependent child after the first child.
The Medicare levy surcharge is 1% for Tier 1 taxpayers, 1.25% for Tier 2 taxpayers and 1.5% for Tier 3 taxpayers.
The PHI tax offset percentage is highest for Tier 1 taxpayers and lowest for Tier 3 taxpayers. The percentage also varies depending on the ages of the persons covered by the relevant health insurance policy.
There are 3 age brackets – under 65, 65 to 69 and 70 or above.
The 2022–23 repayment rates and thresholds if you have a study or training loan, such as a Higher Education Loan Program (HELP), VET Student Loan (VSL) or Trade Support Loan (TSL) debt, are set out in the table below.
The GST and PAYG instalment amounts are usually adjusted every year by the ‘GDP adjustment factor’. This is either calculated on the basis of changes in the GDP (gross domestic product) over a 2-year period or is a percentage set by law.
For 2020–21 and 2021–22, the GDP adjustment factor was reduced by legislative amendment to nil. For 2022–23, the GDP adjustment factor has been reduced by legislative amendment to 2% (instead of the usual 10% uplift).
The cessation of employment as a taxing point for ESS interests that are subject to deferred taxation has been removed with effect from 1 July 2022.
The superannuation and ETP (employment termination payment) thresholds for the 2022–23 income year are listed below.
* The work test for salary sacrificed contributions and non-concessional contributions by persons aged under 75 years was abolished from 1 July 2022.
The 50% reduction in the minimum drawdown amounts has been extended to the 2022–23 financial year. These are the minimum annual payments required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities.
If you receive more than the minimum drawdown amount, you can recontribute these amounts if you are eligible to make superannuation contributions (subject to other rules or limits such as contributions caps).
Superannuation changes from 1 July 2022
A number of superannuation changes took effect on 1 July 2022, including:
COVID-19 early release of superannuation
If you accessed your superannuation early in response to the COVID-19 pandemic, you can choose to re-contribute those amounts by 30 June 2030 without them counting towards your non-concessional contributions cap. The choice must be made in the approved form and given to your superannuation fund before you make the re-contribution.
Superannuation accessed early is tax-free (treated as non-assessable non-exempt income).
Tip! Speak to your financial adviser before making any decisions affecting your superannuation.
The due date for lodging your income tax return for the 2021–22 income year is 31 October. However, if you use a registered tax agent to lodge your return, the due date for lodgment is likely to be later than
31 October, possibly even as late as May next year.
If you don’t use a registered tax agent, you risk delays to your tax refund (if any) if you lodge your tax return before your income statement is marked as ‘Tax ready’, i.e. pre-filled with pertinent information from employers, banks, government agencies and health funds.
The ATO has said that waiting for it to upload information ‘means people don’t have to roll the dice when they lodge, and it’s less likely an amendment will need to be made later, which could result in a tax debt’. If necessary, errors or omissions in your tax return can be fixed through the ATO online amendment process through myGov.
Are you a sole trader?
Are you a partnership?
If you operate your business in a partnership:
As an individual partner, you report on your individual tax return:
The partnership doesn’t pay income tax on the income it earns. Instead, you and each of the partners pay tax on the share of net partnership income you receive.
Are you a trust?
Tip! Registered tax and BAS agents can help you with your tax.
A tax loss is when the total deductions you can claim, excluding gifts, donations and personal superannuation contributions, exceed your total income for an income year.
If you make a tax loss, you may be able to:
The rules for record-keeping still apply in relation to business losses. You need to keep records for 5 years for most transactions. However, if you fully deduct a tax loss in a single income year, you need to keep records only for 4 years from that income year.
Tip! Talk to your tax adviser about the best way to utilise tax losses.
If you’re a sole trader or in a partnership and want to utilise a tax loss, first check if the business activity meets at least one of the tests under the non-commercial loss rules. (Those rules do not apply to losses made by primary producers and professional artists whose income from other sources is less than $40,000.)
The tests are in general terms:
If you meet one of the tests, then you can offset the loss against your other assessable income (such as salary or investment income) in the same income year.
If you don’t meet the tests, you can carry the loss forward to future years. For example, you can offset it when you next make a profit. You may also be entitled to an exercise of the Commissioner’s discretion to use the loss, depending on your circumstances.
Non-commercial losses made by an individual with an adjusted taxable income exceeding $250,000 are quarantined.
Tip! The non-commercial loss rules are complicated. Talk to your tax adviser if you have any doubts about whether a business activity satisfies any of the tests.
Personal services income
If you operate your business through a company or a trust, income earned by the company or trust from the provision of your personal services (personal services income or PSI) will be attributed to you unless:
The company or trust will be conducting a PSB if at least one of four tests are satisfied. These are:
If 80% or more of your PSI (with certain exceptions) is income from one client (or the client and their associate(s)) and the results test is not met, the company or trust will only be able to be treated as conducting a PSB if it obtains a PSB determination from the ATO.
If a company or trust is not conducting a PSB and the PSI was not promptly paid to you as salary or wages, the PSI is attributed to you, the company or trust has PAYG withholding obligations and there are limitations on certain deductions. The company or trust cannot deduct amounts that relate to gaining or producing your PSI, unless you could have deducted the amount as an individual or the company or trust received the PSI in the course of conducting a PSB.
Even if you don’t use a company or trust to derive your PSI, there are limitations on the deductions that you may claim against your PSI. For example, you may not be able to deduct certain home office expenses, for example, occupancy expenses such as mortgage interest or rent.
Tip! The PSI rules are complicated, especially if you provide your services through a company or trust. Talk to your tax adviser if you have any questions.
A lot more people are working from home because of the COVID-19 pandemic. If you operate your business from a home office, you may be able to deduct the expenses of running that office. A home office is a room in your home that is used exclusively (or almost exclusively) for business activities.
Expenses you can claim a deduction for include:
If you are entitled to claim occupancy expenses in relation to your home, you may have a capital gains tax (CGT) liability when you sell your home, due to the possible partial loss of the main residence exemption. The CGT issue arises when you are entitled to claim occupancy expenses, not whether you actually do claim them.
If you work from home but don’t have a home office as such, you can still claim deductions for ‘running expenses’. To simplify matters, the ATO allowed a rate of 80 cents per hour for running expenses incurred in the 2021–22 income year. Of course, you can still make a claim based on your actual running expenses if it produces a larger deduction. But remember that those expenses will need to be apportioned between work and private use and substantiation of the expenses you have incurred will be required.
Tip! If you have a home office, talk to your tax adviser about how to calculate your deduction and the records you must keep.
If you are a sole trader, an individual who is a partner in a business partnership or an individual who is a beneficiary of a trust that carries on a business, you may qualify for the small business tax offset if the business’ aggregated turnover is less than $5 million (yes, $5 million and not the general $10 million small business aggregated turnover threshold). The offset is not available to an individual acting as a trustee.
The offset for the 2021–22 income year (and also for the 2022–23 income year) is equal to 16% of the income tax payable on the sole trader’s or other individual’s taxable income that qualifies as their net small business income.
The offset is capped at $1,000.
If you received a COVID-19 disaster payment during 2021–22, because state or territory health orders prevented you from working in your usual employment:
If you received a pandemic leave disaster payment during 2021–22, you must include it in your tax return as income. These payments were made to eligible individuals who were unable to earn income because either:
Expenses for accommodation, food and drink are normally private in nature and not deductible. However, you can claim a deduction for accommodation, food, drink and incidental expenses you incur if you are ‘travelling on work’ during COVID-19 and must quarantine.
You cannot claim a deduction for quarantine expenses you incur when you:
The fact you were working or are able to work from a quarantine location doesn’t mean you meet the definition of ‘travelling on work’.
If you incur expenses for both work purposes and private purposes, you will need to apportion your expenses. You can only claim the expenses that relate to your work activities.
You can claim a deduction for costs you incurred for COVID-19 test expenses provided the test was undertaken for a work-related purpose, and the purpose of the test was to determine whether you could attend or remain at a place of work. The test can be any test in the Australian Register of Therapeutic Goods, such as a polymerase chain reaction (PCR) test or rapid antigen test (RAT).
To claim a deduction, you must have records to prove that:
You can also claim a deduction for the cost of a COVID-19 test if you required the test to undertake travel away from your home overnight for work purposes.
You should claim only the work-related portion of your expense on COVID-19 tests. For example, if you buy a multipack of 5 COVID-19 tests and you use 2 for work purposes and the other 3 for non-work purposes – such as for other family members or for leisure activities – you may claim only 2/5 (40%) of the expense.
You can’t claim a deduction for the cost of a COVID-19 test if:
You can’t claim the cost of travelling, or of parking, to get a COVID-19 test.
Tip! Talk to your tax adviser to make sure you claim all deductions that you or your business are entitled to claim.
If you have a self-managed superannuation fund (SMSF), you need to appoint an approved SMSF auditor at least 45 days before the due date for lodging the 2021–22 SMSF annual return. The lodgment dates are:
The role of an approved SMSF auditor is to review the SMSF’s financial statements and accounts, and to assess its compliance with superannuation laws.
The auditor must be registered with ASIC and independent of the SMSF. You can find a list of approved SMSF auditors on the ASIC website.
The ATO recommends that you start the process of appointing an auditor early as approved SMSF auditors can be busy.
Tip! If you use a registered tax agent to prepare your SMSF’s annual return, talk to them as soon as possible.
If you are a foreign owner of residential property in Australia, you are required to pay an annual vacancy fee if your property is not residentially occupied or rented out for 183 or more days (6 months) in a year. A year for these purposes (a vacancy year) is each successive period of 12 months starting on the occupation day for the property during which you have continuously held an interest in the dwelling. A vacancy year is not a calendar year or a financial year.
The vacancy fee return must be lodged if you:
The vacancy fee may also apply if you failed to submit a foreign investment application but purchased a residential property before 9 May 2017.
You do not have to lodge a vacancy fee return until a dwelling has been constructed on the land. When multiple dwellings are constructed on the land, a vacancy fee return must be lodged for each new dwelling constructed.
You must lodge a return even when the dwelling has been occupied or made available for rent. If it is owned by 2 or more people as joint tenants, only one return has to be lodged. However, if it is owned by 2 or more people as tenants in common, each foreign owner must lodge a vacancy fee return.
A vacancy fee return must be lodged with the ATO within 30 days after the end of each vacancy year.
If any of the following occur during a vacancy year, you will not have to lodge a vacancy fee return:
The ATO is concerned about a high volume of SMS scams pretending to be from the ATO.
These scams tell you that you’re owed an income tax repayment and ask you to click a hyperlink and complete a form.
Clicking the link takes you to a fake ATO webpage that asks for your personal identifying information, including your credit card details.
The real ATO will never send you an SMS with a link to log in to their online services and will never ask for your credit card details.
If you’re ever unsure whether an SMS or email is really from the ATO, don’t reply. Phone the ATO on 1800 008 540 to check.
Tip! Check out the ACCC’s Scamwatch website for helpful tips and resources.
The ATO has reported that the Serious Financial Crime Taskforce has undertaken further enforcement action in respect of 40,000 individuals suspected of being involved in a major GST fraud involving fake businesses to claim false refunds. Search warrants were executed in relation to 5 suspected offenders located in Sydney as part of Operation Protego. This follows earlier action where raids were executed against 19 individuals.
The ATO wants anyone who has given their myGov details to a criminal to contact the ATO so it can assist to protect the individual’s identity from being used to commit further crimes in their name. Any individual who believes their identity has been compromised should contact the ATO on 1800 467 033.
The ATO noted that social media has played a key role in promoting this type of GST fraud, with reports of people offering to buy and sell myGov details in order to access these refunds. Since investigations were commenced in May 2022, the ATO said it has stopped over $1 billion in fraudulent refunds from issuing.
A South Australian taxpayer has received a criminal conviction and been fined $1,500 with orders to pay $699.30 in reparation after providing false documents to an ATO auditor about deductions for his rental property.
The ATO commenced an audit into the taxpayer’s 2018 tax return after noticing deductions for gardening repairs and maintenance for his rental property were unusually high. When the ATO asked him to supply details about the expenses, the taxpayer provided photos of some tax invoices relating to hire of a skip bin and the removal of some dead trees.
But when the ATO contacted the business that provided those services, it found some discrepancies – the cost of hiring the skip bin was $210 and not $1,090 as claimed by the taxpayer.
The taxpayer was charged with two counts of incorrectly keeping records with the intention of deceiving or misleading a Commonwealth public official.
The ATO has published on its website various taxation statistics for 2019–20. We have picked out some of the more interesting ones.
The top 10 occupations (by average taxable income) are (in order): surgeon, anaesthetist, internal medicine specialist, financial dealer, psychiatrist, other medical practitioner, judicial or other legal professional, mining engineer, engineering manager and financial investment advisor or manager.
The top postcode (by average taxable income) for individuals is in Perth – 6011. The rest of the top 10 is dominated by Sydney postcodes: 2027, 2023, 2030, 2088, 2110, 2025, 2063, 2028. The one remaining postcode in the top 10 is in Melbourne (number 5 in the list) – 3142.
Taxable income and tax
When it comes to gifts or donations, WA had the highest average claim – approximately $1,800 per person. NSW is next in the list at just under $1,000 per person, followed by the ACT, Victoria, Tasmania, Queensland, South Australia and the Northern Territory.
*Property interests implies solely or jointly owned properties, including those bought or sold during the year.
Note! Talk to your tax agent to confirm the correct due dates for your own tax obligations. For example, you may have more time to lodge and pay if impacted by COVID-19 or a natural disaster.
TaxWise® News is distributed by professional tax practitioners to provide information of general interest to their clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.