Working from Home – Tax Optimisation Opportunities

Working from Home – Tax Optimisation Opportunities

Prior to the pandemic, around 8% of Australians were working from home. Now, according to the Productivity Commission, around 40% of us are operating, at least part of the time, from home.[i] One of the benefits of this, apart from spending the day in your slippers, are the tax optimisation opportunities.

Perhaps you had to set up a dedicated work area. You’re absolutely using your own electricity and resources to help you get through your workday. So let’s have a look at what you can claim on your next tax return to ensure you minimise the tax you pay.

Working from Home Tax Deductions

There are a number of home expenses you are likely able to claim to optimise your tax return if you are working from home even part of the time:

• Phone and internet costs
• Electricity
• Computer consumables – ink, paper
• General consumables – pens, note pads, folders
• Home office equipment – computers, phones, chairs, desks, printers
• Software – if you require specific software not supplied by your employer like Zoom or Office
• Cleaning for your dedicated work area

There may also be industry-specific tax optimisation opportunities available to you. The ATO website has a complete list of available deductions and how to calculate each.

Working it Out

There are three main methods employees can use to calculate their home office expenses:

1. Fixed-rate Method – 52 cents per work hour
2. Actual Cost Method
3. The Shortcut Method – 80 cents per work hour. This is only available for work from 1/3/2020 to 30/6/2021

Which method you use depends on the hours you work from home and the amount of money you have had to outlay to get yourself set up. To work out which suits you best, do a rough calculation of costs and hours worked to see which method benefits you the most.

Office Expenses

If you are using your own equipment and supplies, be careful to ensure your calculate your deductions correctly. For example, you can claim the full cost of home office equipment up to $300. But for items over $300 in value, and let’s face it, most things are, you need to claim depreciation (the decline in value) which is calculated as a percentage of the purchase price and varies according to the item involved.

Keep Recording

Whatever you are claiming, and however you are calculating it, you need to keep a record. Receipts, relevant utilities bills and a timesheet or diary showing your hours worked, are a must.

It’s a good idea to keep this up to date throughout the year, because it can be a massive job come tax time. It’s worth setting aside time every week, or month, to take care of this housekeeping. You, and your tax accountant, will thank us come June 30.

A Word About Capital Gains Tax

You might be concerned that in claiming tax deductions in working from home you are jeopardising the CGT-free status of your home. You needn’t worry. Whilst the rules around CGT are complicated, if you are employed by company CGT does not apply. That said, have a chat with your financial advisor or accountant to clarify where you stand so you don’t get a rude shock when you come to sell your home.

If you are working from home and would like advice on what your entitlements are, the team at Manly Financial Services have the knowledge and experience to help you make the most of tax optimisation opportunities. Call us on (02) 9976 3388 or contact us via the below link.

Interested in knowing more?

References:
[i] https://www.pc.gov.au/research/completed/working-from-home