Tax deductions for 2023: why your action should start now

These five tax tricks might help Australians generate thousands of extra dollars in their ATO refund this year if they act now.

Thousands of extra tax refund dollars can be generated by people who perform a few financial tricks now, rather than wait until the traditional end-of-financial-year rush.

From work-related travel and home office claims and to superannuation contributions and timing investment gains and losses, the biggest refunds in 2023 will go to those who plan for them, tax specialists say.

H&R Block director of tax communications Mark Chapman says the earlier you start planning, the better.

“It’s definitely something you shouldn’t leave until the back end of June when you are trying to chase deductions and are possibly spending more than you should,” he says.

Here are five areas where early action can pay off.

1. CAR CLAIMS

People who use their motor vehicles for work can claim either 78c per kilometre driven or use a logbook recording actual expenses. Chapman favours logbooks because “you almost always get a bigger deduction than using the cents per kilometre method, which is limited to 5000km”.

The decline in value of a vehicle may be worth thousands of dollars alone each year, and then there are surging petrol and other running costs.

He says a logbook showing 12 weeks of driving activity can be valid five years. You cannot claim travel between home and workplace, but driving between workplaces is deductible “provided you don’t go home in between”.

Mr Taxman founder Adrian Raftery says the removal of Covid lockdowns has resulted in more people using their cars for work-related purposes.

“Do a log book for the next 12 weeks if you haven’t already,” he says.

Dave POW Tabain now takes a greater interest in his tax. Picture: John Grainger

2. INVESTMENT TIMING

“Time your capital gains,” Raftery says.

“If you are sitting on a nice potential – but unrealised – capital gain in either shares, property or crypto then perhaps consider the timing of your disposal – a sale after 1 July will mean another year before you have to pay the taxman plus give you a full year to do some serious tax planning,” he says.

Raftery says people who already have capital gains may offset them with capital losses by selling poor-performing shares or other investments.

3. SUPER STRATEGIES

Raftery says pumping extra money into superannuation can help earn a $500 government co-contribution for lower income earners, or deliver bigger tax deductions for higher earners who make personal contributions up to the $27,500 annual cap.

“If your super balance is under $500,000 and you haven’t contributed the full $27,500 deductible amount into super in any year since 2018-19, there is a chance to boost your retirement savings as well as getting a nice tax deduction if you take advantage of the super catch-up rules.

Chapman says the $27,500 annual cap includes employers’ compulsory payments and salary sacrifice contributions. “For anything that’s left over, you can make a personal tax-deductible contribution into super of that amount.”

4. WORKING FROM HOME

Millions of Australians have continued to work from home after Covid lockdowns ended, and Chapman says the pandemic “shortcut” method of deductions at 80c per hour no longer exists.

“The ATO is in the middle of changing the rules, backdating to 1 July 2022 … they have abolished the shortcut rate,” Chapman says. Other WFH deduction methods are also changing, so be prepared, he says.

“Keep a complete log of all hours worked at home, and keep bills for all items.”

5. PREPAY AND SAVE

People with tax-deductible expenses such as annual professional subscriptions or income protection insurance can pay for a full year upfront before June 30 and claim their deduction sooner, Chapman says

Some people prepay interest on investment loans, or pay for property repairs and maintenance before June 30 to bring forward their deductions.

Raftery expects more audit activity this year, especially for those reporting increases in both car and home office expenses.

“So don’t try to push the boundaries and go too far because you will not like the taxman’s response when they find out,” he says.

The ATO has many occupation and industry specific guides to help workers understand just what they an claim.

Moves made now can make a big difference to your finances from July.

TAKING TAX CONTROL

Author, trainer and athlete Dave POW Tabain says after 14 years as a small-business owner, “I’m sick of paying dumb tax”.

Tabain uses a bookkeeper and accountant, and also does his own research including examining the ATO website.

“I’m excited about keeping on top of it because I know how much it can save me,” he says.

“It’s as important as earning your money. Making money is one thing – the next thing is to keep your money and have it work for you.”