Tax return time is around the corner with the potential for huge refunds for those working from home.
Platinum Accounting managing director Coco Hou CPA reckons millions of Australians could benefit and has come up with six top tips.
Workers need to understand what types of deductions for expenses they may be able to claim through their individual tax returns.
“This year, the allowable deductions claimed through tax returns are expected to grow significantly,” Hou said.
“Many people working from home are drawing on services such as internet, electricity and water. For many, a part of the home has now become an office where work is undertaken.”
1. Record Keeping
“If people want to claim deductions for expenses associated with services they may be using while working from home, they will need to undertake careful record-keeping," Hou said.
"Keeping a timesheet is essential for claiming utility deductions. This enables the person preparing the tax return to understand what portion of the individual's home running costs can be attributed to their work from home time. Utilities may include electricity, gas, phone, internet, and water.
"Other expenses may include rates, insurances."
2. Documentation
"Many people may also have to go out and buy technology, office equipment, furniture, consumables such as paper, and other items to set up work at home. These expenses may also be claimed.”
Hou is encouraging people to be diligent with record-keeping and to keep invoices and receipts for tax purposes.
“Invoices and receipts are important for work-related purchases. The more claims you make, the more evidence you need,” Hou said.
3. Make use of apps
"I always encourage my clients to download and use simple apps that help you to capture and manage expenses,” Hou said.
“In the old days, people used to keep these in shoe boxes. Thankfully apps make record keeping a lot easier. You can simply take a photo of the documents and upload them to the cloud.
“Most good apps will integrate with cloud-based accounting solutions such as Xero. This means your accountant can access the information easily when preparing your tax return. Ideally, ask your accountant which apps they use and download one of these."
4. Travel
“While most people are confined to their homes, travel can be necessary for some. If you need to leave the home to travel somewhere to purchase items essential to your work, you may incur costs doing this.
“If you travel by car or public transport costs are incurred. You may need to put petrol in your car. Keep a log book for your vehicle and keep track of the kilometres travelled."
5. Easily overlooked items
“Don't forget to include expenses associated with car insurance or subscriptions for services that you may need to access in the course of your work such as media accesses," Hou added.
6. Purchasing assets
“For workers purchasing items to set up workspaces at home such as desks, chairs and other items, it is important for wage and salary earners to know that the threshold for instant assets write off is $300. However, for business owners, including sole traders, the threshold is $150,000, up from $30,000. So for those with available funds, it is a good time to shop if you have the cash.”
Hou adds that the ATO is assisting people where it can.
“Higher running costs claims are now allowed. The ATO has increased this from 52 cents per hour to 80 cents per hour for running expenses while working from home,” Hou added.
“The ATO has also loosened requirements around workspaces. No dedicated working area is required. Each family member can make a claim through their own return, even though they might be sharing the working space. This was not allowed in the past. It is now much easier to claim. You only need to keep a timesheet, no other substantiation is required. Importantly the ATO wants to avoid 'double-dipping'. Expenses must be out of pocket expenses. If the expenses are reimbursed by your employer, then the claim is not allowed.”
FINSIA will be running a comprehensive EOFY webinar later this month. More details here.
