Tax Changes 2023 & 2024 for You and Your Business

Individuals

• Whilst the tax rates for both residents and non-residents remain unchanged, the low to middle income tax offset was removed – If you have already lodged your 2023 Individual income tax return for the year, you may have noticed that your usual tax refund has decreased by up to $1,500.
• The self-education expense threshold of $250 was removed meaning that you are no longer required to reduce your allowable work related self-education expenses by $250 to calculate your deduction.
• Working from home has been a topical point of discussion in this post COVID working world. For the 2023 financial year, the revised fixed rate method has increased to $0.67 per hour of work. Separate to the fixed rate method, the actual cost method is still available however the shortcut method introduced in March 2020 has now been removed.
  
  Although the fixed rate method has increased from $0.52 per hour of work, the rate is now inclusive of additional costs including mobile phone expenses, stationery etc. The record keeping requirements have also changed with a requirement to keep record of actual hours work.
• For individuals claiming motor vehicle expenses under the cents per kilometre method, the rate has increased to 78 cents per Km for the 2023 financial year and will increase again to 85 cents for 2024.

Businesses

• There was a buying frenzy of assets prior to 30 June 2023 as eligible businesses were able to claim an uncapped immediate tax deduction for the cost of assets installed and ready for use within the 2023 financial year under the temporary full expensing regime.
  
  For the 2024 financial year, the small business instant asset write off threshold is currently set at $20,000 for businesses with an aggregated annual turnover of less than $10 million. This threshold will be applied on a per asset basis.
• The car limit is the maximum allowable depreciation & GST deduction for a vehicle. For the 2023 financial year, this increased to $64,741 and will increase again to $68,108 for the 2024 financial year.
  
  When calculating your deduction, you must consider if you vehicle meets the definition of a car and must also reduce the car limit by your business use percentage as determined within your log book.
• Majority of our clients will be eligible for the 20% bonus deduction under with the small business technology investment boost and skills and training boost. Eligible businesses can deduct an additional 20% off eligible costs capped at $20,000 of bonus deductions per year i.e. $100,000 of actual expenditure. Claims can include computer equipment, e-commerce costs, cyber security systems, digital advertising, payments to registered training providers etc.
  
  When preparing 2023 Tax Returns, we are seeing this have a real impact for clients being able to claim for the following periods:
  • 29^th March 2022 to 30^th June 2022
  • 1^st July 2022 to 30^th June 2023

Although the skills and training boost will apply until 30 June 2024, the technology boost ceased 30^th June 2023.

Superannuation

• From 1 July 2022, the work test no longer applies to retirees aged between 67 and 75 for specific contributions. Both non-concessional and salary sacrifice contributions can be contributed to super assuming their total super cap is below $1.9 million for non-concessional contributions without passing the work test.
  
  The work test, a requirement to work 40 hours in any 30 day period within the financial year, still applies to other contribution types including personal concessional contributions.

• Individuals up to the age of 75 may now be able to use the bring forward rule which previously cut off at 67 years. Prior to making any non-concessional contributions, the member must review their total super balance cap and any non-concessional contributions made in the last 2 years.
  
  The bring forward non concessional rule effectively allows an individual to contribute up to 3 years of non-concessional contributions in the one year – potentially $330,000! We would recommend reaching out to our office to ensure this applies to you prior to making any contributions.

• Most businesses and individuals would already be aware of the steady increase in super guarantee rates. Most relevant below:
  • 2022    10%
  • 2023    10.5%
  • 2024    11%

Most payroll software should have already captured the above however it is worth checking to ensure you are up to date with employee obligations.

• In addition to super guarantee rate changes, the maximum super contributions base has increased as follows:

Employers generally do not have to provide super guarantee on the part of earnings above this limit.

• An Individual’s total superannuation balance is relevant when determining your eligibility to use carry-forward concessional contributions, make non-concessional contributions and when calculating your exempt current pension income when in pension phase.
  
  More specifically, the transfer balance cap being the lifetime limit on the amount of super which can be transferred into the tax free pension phase, has increased from $1.7 million to $1.9 million as at 1^st July 2023.

• There will be no further extension to the 50% reduction in minimum pension drawdowns for 2024. If you are a SMSF trustee with members in pension phase, you should already be reviewing the fund’s cash flow to ensure it can meet the increased pension payments.

• The downsizer contributions age requirement reduced from a minimum of 60 years old to 55 years or older from 1^st January 2023.

That’s the wrap up of the 2023 & 2024 tax changes with most of the above being positive changes for the tax payer / employee. If any of the above has sparked your interest and you wish to discuss it in more detail, please feel free to reach out as one of our team members is always available for a quick chat. Now that 30 June has passed, the countdown to Christmas begins – 17 weekends left!