We’re now less than two weeks from the end of financial year (EOFY), and while tax office changes will mean returns are likely to be smaller in 2023-24, there are still sweeteners.
The low- and middle-income tax offset (LMITO), which was responsible for big returns during the COVID-19 years, has expired.
But its cousin, the low-income tax offset (LITO) is still around and is worth up to $700 depending on your income, with those earning up to $66,667 eligible for a tax break.
And you don’t even need to do anything except file your tax return for the 2022-23 financial year to benefit from the offset, because it’s automatically applied by the Australian Taxation Office (ATO).
But beware – rushing in to file your return could be problematic and cause wider issues, with the ATO advising people to wait a few weeks and allow pre-fill data from employers to become available before filing their return.
The LITO is worth the maximum $700 for those earning $37,500 or less, with the figure reducing from there as income rises.
The amount reduces by 5 cents for every $1 your income is between $37,500 and $45,000.
So, for example, someone earning $45,000 would be eligible for a $325 tax break in 2022-23.
From there, earning between $45,001 and $66,667 will receive 1.5 cents less for every $1 their income is above $45,000.
Beware of changes
That’s not the only thing you need to know ahead of EOFY this year.
The ATO has also changed the way work-from-home (WFH) tax deductions work, with the COVID-era shortcut method canned in favour of a revised fixed-rate method for claims.
Under the new rules taxpayers can still make claims for office equipment and running expenses, but a real-time diary of remote work hours will be required.
Your employer can help you provide these records, though they must have been made in real time, not in retrospect.
Depreciation claims for office equipment must now also be made separately, the ATO has said.
“You need to work out the number of hours you worked from home and multiply that by 67 cents,” ATO assistant commissioner Tim Loh has told The New Daily.
“The best thing I would suggest is to check out the ATO website. We have calculators that can help you work out the depreciation.”
Focus on side hustles
Side hustles are also under the spotlight ahead of tax time, with the ATO saying it is cracking down on people with second incomes failing to report this year, amid a rise in multiple jobs.
Those who are earning recurring income from business-like activities are in the cross hairs, with the ATO releasing guidance for people to determine whether their hobby has turned into a job.
This includes working out whether you should have signed up for an Australian Business Number (ABN) if you haven’t already, and potentially even registering for GST.
“We want to make sure people understand that when you do earn money from these side hustles, odd jobs or even cash jobs, that you need to declare all this income,” Mr Loh said.