Welcome to our January newsletter. In this quarter’s issue, we have provided articles on the following topics:
- Staff and Office updates.
- ATO announces changes to working from home deductions.
- From 1 July 2022 employers do not pay FBT on eligible electric cars and associated car expenses.
- Indexation of the general transfer balance cap (TBC) is due to increase on 1 July 2023 by an increment of $200,000.
Staff and Office Updates
Thank you all for your patience in receiving this belated update. We have been kept busy with the change of systems that had an end of life.
We are sad to say that Allison has resigned and Snow has decided to move to Melbourne, we wish both girls all the best for the future.
We also have the pleasure of welcoming two new staff members Adam and Aman and look forward to them being here for a long time to come.
ATO announces changes to working from home deductions
The Australian Taxation Office (ATO) has refreshed the way that taxpayers claim deductions for costs incurred when working from home. The changes better reflect contemporary working from home arrangements.
Assistant Commissioner Tim Loh explained that taxpayers can choose one of two methods to claim working from home deductions: either the “actual cost” or “fixed rate” method. Only the fixed rate method is changing.
The revised fixed rate method applies from 1 July 2022 and can be used when taxpayers are working out deductions for their 2022–23 income tax returns.
Revised fixed rate method:
The revised fixed rate method can be used from the 2022–23 income year onwards. The changes are:
- Rate
- The cents per work hour has increased from 52 cents to 67 cents.
- What’s covered by the rate
- The revised fixed rate of 67 cents per work hour covers energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. No additional deduction for any expenses covered by the rate can be claimed if you use this method.
- What can be claimed separately
- The decline in value of assets used while working from home, such as computers and office furniture.
- The repairs and maintenance of these assets.
- The costs associated with cleaning a dedicated home office.
- Home office
- The revised fixed rate method doesn’t require taxpayers to have a dedicated home office space to claim working from home expenses.
- Record keeping
- Taxpayers need to keep a record of all the hours worked from home for the entire income year – the ATO won’t accept estimates, or a 4-week representative diary or similar document under this method from 1 March 2023.
- Records of hours worked from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year.
- Records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour (for example, if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses).
Actual cost method:
The actual cost method hasn’t changed. Taxpayers can claim the actual work-related portion of all running expenses.
This includes keeping detailed records for all the working from home expenses being claimed, including:
- all receipts, bills and other similar documents to show taxpayers have incurred the expenses, a record of the number of hours worked from home during the income year (either the actual hours or a diary or similar document kept for a representative 4-week period to show the usual pattern of working at home).
- a record of how taxpayers have calculated the work-related and private portion of their expenses (for example, a diary or similar document kept for a representative 4-week period to show the usual pattern of work-related use of a depreciating asset such as a laptop).
The ATO is reminding taxpayers that if they are claiming their actual working from home expenses, they can’t claim a deduction for expenses which have already been reimbursed by their employer.
More information:
No matter which method is used, if taxpayers purchase assets and equipment for work and it costs more than $300, they can’t claim the full amount immediately. For each of these items, the deduction must be claimed over a number of years and the work portion claimed (known as decline in value or depreciation).
Electric cars exemption
From 1 July 2022 employers do not pay FBT on eligible electric cars and associated car expenses.
Eligibility:
You do not pay FBT if you provide private use of an electric car that meets all the following conditions:
- The car is a zero or low emissions vehicle
- The first time the car is both held and used is on or after 1 July 2022
- The car is used by a current employee or their associates (such as family members)
- Luxury car tax (LCT) has never been payable on the importation or sale of the car.
Benefits provided under a salary packaging arrangement are included in the exemption.
The government will complete a review into this exemption by mid-2027 to consider electric car take-up. We will provide an update when this review begins.
Zero or low emissions vehicle:
A vehicle is a zero or low emissions vehicle if it satisfies both of these conditions:
- It is a:
- battery electric vehicle
- hydrogen fuel cell electric vehicle, or
- plug-in hybrid electric vehicle.
- It is a car designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver).
Motorcycles and scooters are not cars for FBT purposes and do not qualify for the exemption, even if they are electric.
Plug-in hybrid electric vehicles – 1 April 2025 onwards:
From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law.
However, you can continue to apply the exemption if both the following requirements are met:
- Use of the plug-in hybrid electric vehicle was exempt before 1 April 2025.
- You have a financially binding commitment to continue providing private use of the vehicle on and after 1 April 2025. For this purpose, any optional extension of the agreement is not considered binding.
Transfer balance cap indexation
Indexation of the general transfer balance cap (TBC) is due to increase on 1 July 2023 by an increment of $200,000.
Individuals who start their first retirement phase income stream from this date will have a transfer balance cap of $1.9 million.
What is entitlement to indexation based on?
We identify the highest ever balance in the individuals transfer balance account. We’ll use this information to calculate the proportional increase in their TBC and apply that new personal TBC to their account going forward. This means they’ll have a personal TBC between $1.6 million and $1.9 million.
When do we do this calculation?
The calculation occurs using the information received and processed by us as at close of business 30 June 2023. We’ll use and display what we consider the individual’s personal TBC to be. After indexation ATO online services (and Online services for agents) will be the only place an individual who had a transfer balance account prior to indexation will be able to see their personal TBC.
An individual who already had a transfer balance account and at any time met or exceeded their personal TBC will not be entitled to indexation and their personal TBC will remain the same.
Does late or retrospective reporting by providers after indexation have an affect?
If this occurs there may be significant consequences for the individual. We’ll reconsider if there was an entitlement to proportional indexation and apply this new information to their account.
Are there consequences on other caps and limits?
Indexation will create flow on to other parts of the tax and super systems. This includes the defined benefit cap which will increase to $118,750.