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Taxpayers are urged to find every legitimate deduction they can before lodging tax returns this year, as many taxpayers will be receiving smaller refunds thanks to the axing of a key tax offset and stricter rules around working-from-home deductions.
Since 2018-19, the low- and middle-income offset (LMITO, or lamington as it was colloquially known) boosted the refunds of millions of taxpayers. It boosted refunds by as much as $1500 after it was increased for the 2021-22 year. However, the offset was not extended into the 2022-23 year, though the low-income tax offset (LITO) continues.
Finding legitimate deductions in tax returns is important this year as more taxpayers are likely to be paying the ATO.Credit: Getty Images
Someone earning $90,000 in 2021-22 received the $1500 LMITO, but no LITO, and so will miss out on the $1500 offset in their 2022-23 tax return assessment. An “offset” can only reduce tax payable to nil – any excess offset is not refundable.
The online calculator provided by Atotaxrates.info also shows someone earning $70,000 in 2021-22 would have benefited from the LMITO to the tune of $1500, plus a LITO of $175. However, that same person stands to only pick up the $175 LITO in their tax return this year.
Many of the millions of taxpayers receiving the offsets may not have even been aware of them, as they are calculated automatically by the ATO without the taxpayer having to do anything.
A further change for those filling out their tax returns for the 2022-23 year is the axing of the temporary 80¢ an hour “shortcut” method for claiming working-from-home expenses, which has been replaced with a revised fixed rate method of 67¢ an hour.
That means someone working two days a week from home with four weeks of annual leave can claim $514.56, compared to $614.40 under the 80¢ method.
However, with the 67¢ method, you can separately claim the depreciation of the value of assets used for working from home, such as computers and office furniture.
Also, you do not need to have a home office, but under the 67¢ method, you can make the claim even if you work from the sofa.
Some taxpayers may be able to claim more in working-from-home deductions by keeping a diary and using “actual” home office expenses and having the evidence to back it up in case the ATO wants to see it, says Mark Chapman, director of tax communications at H&R Block.
He says the loss of the LMITO and a reduction in working-from-home deductions means taxpayers should put extra effort into the “hunt for deductions that you may not have claimed in the past, and to claim everything that you are entitled to claim”.
He says you should also check to see if there are any claims you can make that are specific to your occupation. The ATO has a list of things that can be claimed for each occupation.
For example, tradespeople can claim the cost of sunscreen, sunhats and sunglasses where their duties require them to spend prolonged periods working outdoors.
You can claim the cost to buy, hire, repair or clean a compulsory uniform, such as worn by some workers in the retail sector.
Chapman says other deductions include travel between two workplaces, professional or union subscriptions and the cost of income protection insurance.
It is best to wait until at least late July to lodge tax returns as that is when the pre-filling of information into myTax, such as interest earned from bank accounts, is usually complete.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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