Tag Archives: Tax

What you can claim when working from home

By Robert Wright /June 11,2021/

Setting up a home office? Here’s how to create a comfortable workspace, while offsetting the extra costs of working remotely. If you’re among those who’s decided to say ‘so-long’ to the office, you’ve probably also realised that having the right home-office set up is essential for your productivity – and sanity.

As many of us learnt during lockdown, trying to fit in a full day’s work at the dining room table isn’t always the most productive option.

You might also have noticed what many freelancers have known for years: Working from home comes with extra costs, as does setting up your home office.

So, what do you need to do to get your workspace set up for productivity – and comfort – and how can you offset the extra costs that come with working from home?

Getting ergonomic

For most computer work, there’s a few key areas you need to customise to suit you:

  1. The height of your desk and chair. You’ll know you’ve gotten this right when your forearms are parallel to the ground, with your wrists either straight, at or below shoulder level. Your knees should be level with your hips and feet flat on the ground, or on a footrest.
  2. Your monitor set up. Your monitor needs to be straight in front of you, an arm’s length away. The top of the screen should be at or slightly below eye level. Use a monitor riser if needed to get your monitor to the right height. Also consider the brightness of your display – it should be just a little brighter than surrounding ambient light.
  3. Location of key objects. Place your keyboard and mouse on the same level surface and keep other items you use often within easy reach. If you use the phone a lot, put it on speaker or use a headset to avoid neck and shoulder strain.
  4. Light sources. You’ll need sufficient ambient light to illuminate your workspace, so that you’re not straining your eyes. Beware of indirect lighting from windows that can cause glare on your monitor screen.

Getting (and expensing) equipment

Setting up an ergonomic workspace can involve a bit of gear, even if there are some inexpensive home solutions. At the very least you’ll need a computer, decent office chair, full size monitor, keyboard, and mouse. You may also need to add in a footrest, monitor riser, laptop dock or stand, headset, lighting, and any other office equipment you use regularly, like a printer.

This can add up to quite a hefty price tag! But don’t worry, it’s unlikely you’ll need to foot the entire bill yourself.

If you’re a company employee, start by speaking to your employer. Many companies will offer to either source equipment for you, lend it to you or reimburse you for purchase/s you make.

Under Workplace Health and Safety Laws, employers still have a duty to ensure the health and safety of workers, even if they’re working from home. In fact, some companies will already have occupational health and safety policies that mandate an ergonomic set up using a certain type of office equipment.

Tax deductions: What can I claim?

While you can save money by working from home (less transport costs, homemade lunches, no need for fancy clothes) it does come with other costs (and paperwork) you may not have thought about.

Fortunately, you’re allowed to offset many of these costs against your earnings by claiming a deduction in your annual tax return. According to the ATO, expenses you can claim a deduction for include:

  • the cost of electricity for heating, cooling, and lighting the area you’re working in, and running items you’re using for work.
  • cleaning costs for a dedicated work area.
  • phone and internet expenses
  • computer consumables (for example, printer paper and ink) and stationery
  • home office equipment, including computers, printers, phones, furniture, and furnishings. You can claim either the
    • full cost of items up to $300
    • decline in value (depreciation) for items over $300.

To make a claim, you need to have spent the money and have a record to prove it. You can’t claim a deduction where you’ve been reimbursed by your employer for the expense.

Tax deductions: How do I claim?

Because it can be tricky to track and report on your expenses when working from home, the ATO has introduced a temporary ‘shortcut method’. This is now in place up until 30 June 2021 (and may be extended further).

The shortcut method allows you to claim a deduction of 80 cents for each hour you work from home. It covers all the deductible expenses listed above. You’ll need to keep a record of the hours you worked, in the form of a roster, diary, timesheet or similar.

With remote work now widely accepted, many people can’t wait to give hour-long commutes, open plan offices and office politics the flick for good. Just make sure you take the time to get your office set-up right and avoid those nasty repetitive strain injuries in years to come.

Source: FPA Money and Life

Majority of working Aussies to benefit from personal income tax cuts

By Robert Wright /December 04,2020/

Tax cuts proposed in the recent Federal Budget were passed in parliament on Friday 9 October, and you might see some of the benefits before Christmas.

The government has brought forward tax cuts originally planned for 1 July 2022 and backdated them to 1 July 2020. Plus, low and middle-income earners are still able to benefit from existing tax offsets.

Has my marginal tax rate changed?

The upper thresholds have increased for some tax brackets, as highlighted in the table below:

(*excluding 2 % Medicare Levy)

Can I benefit from the tax offsets?

If you earn up to $126,000 per year, you may be eligible for the low and middle income tax offset (LMITO). This was previously introduced as a temporary measure and scheduled to end when the 1 July 2022 tax cuts kicked off. But the good news is that despite bringing forward these tax cuts, the government has kept the LMITO for the 2020–21 financial year.

And, if you earn less than $66,667 per year, you may be eligible for an additional tax offset called the low income tax offset (LITO). As part of this package of tax cuts, this tax offset was increased from $450 to $700.

How much will I save from the tax cuts?

The below table shows indicative tax cuts, based on the legislative changes for an individual in 2020-21, to the tax rates, thresholds, and offsets that were applicable for 2020-21 (before these changes):

When will I receive the new tax savings?

Your take-home pay should reflect the new rates before Christmas. The Australian Taxation Office (ATO) has given employers until 16 November to make changes to payroll processes and systems.

As you’ll have already paid personal income tax at the original rate since 1 July this year, you’ll receive your entitlement to the reduced tax payable for the entire 2020–21 income year when you lodge your income tax return.

Source: AMP

What tax deductions can I claim working from home?

By Robert Wright /July 20,2020/

According to the Australian Taxation Office, there are three ways to claim your home office running expenses.

The actual cost method

Under this method, your tax deductions include the actual costs of work-related expenses. This applies to things such as the costs of your home office furniture and fittings, as well as equipment such as computers and desks.

If the cost of depreciable home office items is less than $300 you may claim the full cost of these items as a tax deduction. If the cost of depreciable home office items is over $300, you may claim a deduction for the depreciation of these items.

If you regularly phone your employer or clients while you are away from your usual place of work, you can also claim a full tax deduction for the work-related portion of the phone calls you make at home and the cost of renting your phone.

Other costs you can claim a deduction for under the actual cost method include:

  • Internet access charges.
  • Printer and printer cartridges.
  • The cost of heating, cooling and lighting your home office, over and above the amount you would ordinarily pay if you did not work from home.
  • Any repairs to your home office furniture and fittings.

As your home isn’t considered to be a place of business, you can’t claim non work-related expenses under this method. This includes rent, the interest you pay on your mortgage and the cost of any insurance premiums.

The fixed cost method

Under this method, instead of tax deductions relating to the work portion of costs incurred at home, you can claim a rate of 52 cents per hour for expenses such as heating, lighting and cooling, come tax time. You can also apply the same rate when claiming a depreciation of home expenses, for example any furniture you’re now using in your home office.

The shortcut method

At the moment a special method, known as the shortcut method, is available to people working from home to claim work-related expenses as tax deductions. Please note however, that the special rate is only available from 1 March 2020 to 30 June 2020.

Under this method, each person in a household can claim expenses based on a rate of 80 cents an hour. So more than one person in a household – flatmates or members of the same family – can each claim a deduction for their expenses incurred that directly related to working from home. All that’s required to do so, is keeping a log of the hours you work.

The 80 cents per hour shortcut method seems like an easy way to work out your home office expenses come tax time. However, the risk for people using this method is that they won’t claim as much as they are entitled to under the other two methods. You also can’t claim the cost of equipment such as webcams and office furniture, as well as stationery or computer consumables like printer cartridges.

Whichever method you choose, it’s a good idea to keep accurate records of all your actual expenses, plus the hours you have worked. That will allow you to choose the best method when you or your tax agent prepares your tax return.

Source: BT

Say goodbye to tax troubles

By Robert Wright /July 01,2019/

Do you find yourself drowning in random receipts when EOFY comes around? Learn to lodge your tax return the easy way with these last-minute and longer-term tax hacks.

Tax paperwork is something few of us take in our stride. In fact, the majority of people hand over much of this responsibility to someone more qualified. In the 2016/17 financial year almost three-quarters of Australians lodged their return via their tax agent. But even your accountant can’t do it all for you. Gathering together receipts and records you need to pass along can become a headache when you leave it all to the last minute.

Maximise deductions

Depending on your situation – married or single, salaried employee or sole trader for example – there are all sorts of legitimate expenses you can claim against your income to lighten your tax burden. A good accountant can certainly advise on which types of deductions you could potentially include in your return. But whether you’re lodging through an agent or doing your tax return DIY-style, knowing what expenses to record can help you keep receipts organised throughout the financial year.

A visit to the ATO website (https://www.ato.gov.au/) can keep you in the know about eligible deductions in the current financial year. They also provide a handy myDeductions tool in the ATO app for tracking these deductible expenses as they happen. There are also a host of other apps available for keeping track of your spending, and not just the tax-deductible kind. Expensify has been popular for a few years now. Not only does it scan and store receipts, it actually pulls information including date, time, amount and merchant, into a CSV file ready for your accountant at tax time. There’s also a more concierge-style solution called Squirrel Street (formerly Shoeboxed) available here in Australia. For a monthly subscription you can mail your receipts to be scanned, uploaded and categorised on your behalf.  

If you’re eligible to claim some of your car expenses as a deduction, there’s also a nifty app to make this easier too. Providing you’re following the logbook method for calculating vehicle usage, Vehicle Logbook is an ATO compliant app that gives you an easy way to capture and collate all that essential journey info.

Investment costs

Just like money you earn from working, income from investments is liable for tax. Whether that’s rent from a property or dividends from shares, there may be deductions you can claim against these investment earnings. While an accountant can certainly offer guidance on these deductions, a Financial Planner can advise you on the overall costs and benefits of your investments. Tax is just one of the costs you need to keep in mind when exploring investment options and coming up with an investment strategy to meet your financial goals.

Tidy-up for next time

By knowing what deductions and offsets you can legitimately claim, and keeping on top of record-keeping, you could be boosting your chances of getting a tax windfall after lodging your return. But if your overall finances are in a bit of muddle, there may be just as much value in doing a spot of financial housekeeping and decluttering your finances to get all your money matters in the best of shape for the future.

Source: FPA Money and Life, June 2019