While working from home has been around before COVID-19 happened, this setup has never been more convenient and effective in continuing business operations at the time of a pandemic. And if you’re paying taxes in Australia, did you know that there are deductions you’re entitled to because of your home office expenses? Here are eight WFH tax return tips you need to know
Know if you’re entitled to claim a deduction. A tax accountant follows three general rules for claiming WFH tax deductions: You shelled out money for the expenses and were not reimbursed by your employer; The expenses are directly linked to earning your income; You can prove the said expenses through records.
Identify the work-from-home expenses you can claim. Here’s what you can claim according to the Australian Tax Office (ATO):
World-related phone and internet expenses
Home office equipment (e.g., computers, furniture) purchase, repairs, and depreciation costs
Computer consumables and stationery
Cleaning expenses for your WFH area
Running expenses (e.g., electricity and gas expenses). For this particular item, the fixed-rate prescribed by the ATO is 45 cents per hour for easier computation.
Compute your expenses. Speaking of computing possible deductions for your tax return, there are three methods:
Shortcut method. In this method, the rate is fixed at 80 cents per hour. It can be used if you worked from home during these periods: March 1 to June 30, 2020, and July 1, 2020 to June 30, 2021.
Fixed-rate method. Here, the rate is fixed at 52 cents per hour. This is applicable for the hours you spent working at home before March 1, 2020.
Actual cost method. As the name implies, you will be calculating your expenses based on what you’ve actually incurred while working remotely.
Keep a record of the hours you worked from home. No matter which computation method you’ll use, one thing remains the same: You have to log the hours you spent working from your home office.
Make it a habit to compile your receipts. Not only will you need to keep a record of your WFH hours, but it’s also highly recommended that you compile the receipts of your WFH-related expenses in one secure place.
Strategise when to file your return. During the pandemic, many have experienced a significant decrease in their income. Experts recommend paying taxes early in the year so you can obtain significant deductions (because your total income is lower than what the ATO has initially calculated). However, if your type of employment has allowed you to incur more net income while working from home (e.g., you’re a sole trader), tax accountants recommend filing until October so you can acquire the money you’ll need to cover your taxes.
Be updated about the latest tax rules. To avoid getting penalised, you have to be mindful of the deadlines set by the ATO. Additionally, you also have to keep yourself abreast of the latest rules and regulations regarding taxation and economic help for employees.
Consult a professional tax accountant. If you want to make sure you’ll lodge your return promptly and correctly, you’re advised to enlist help from a professional in this field. At the end of the day, a tax accountant can help save you time and energy.
