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home office tax claims

What’s New for 2020FY Home Office Tax Claims due to COVID-19

With an increased number of employees working from home due to the Covid-19 pandemic, home office expense claims have become more common deduction items for the 2020 tax year. Anyone who has worked from home, they may be able to claim a tax deduction for expenses they necessarily incur related to performing their work duties.

 

Traditionally expenses that can be claimed as a tax deduction by employees required to work from home includes two categories:

  1. Home office running expenses, and 
  2. Occupancy expenses.

 

Home office running expenses

In most cases, claiming home office tax deductions for these items will require some substantive evidence which should be understood to demonstrate how the deduction has been calculated. 

The ATO allows the following methods for calculating running expenses:

 

Fixed-rate

A fixed-rate of 52 cents per hour can be claimed for each hour worked from home and represents running expenses. This method is simple and more commonly used as it does not require full substantiation of actual expenses. Employees will need to keep a record of actual hours worked at home or a diary showing the usual pattern of working from home over a four week period (applied across the remainder of the year).

 

For instance, if an employee spent 10 hours per week for the whole year (48 weeks estimated after excluding public holidays and annual leave), the claim under this method will be 10 hours per week x $0.52 per hour x 48 weeks = $249.60.

 

This method covers heating, cooling, lighting, cleaning and the decline in value of the furniture.

 

If using this method, the following can be claimed in addition as per usage:

  • Phone and internet expenses
  • computer consumables and stationery, and
  • a decline in value on the computer or other equipment

Employees claiming are required to separately work out their eligible claim for these items (as explained below).

 

Actual running expenses

To calculate the claim for running costs, as an alternative to the fixed rate method employees can use the actual running expenses method. This method is more complex requiring more detailed records but may result in a larger claim.

 

To use this method, they will need to work out how much of their household running expenses ‘reasonably’ relate to performing work in the dedicated office. As an example, a reasonable method of apportionment could include working out what floor area relates to the dedicated home office as a percentage of the total floor area of the home. This percentage is applied to actual running costs incurred during the period including electricity etc. Employees will need receipts of expenses and records to prove the claim.

 

Some common examples of working from home expenses an employee can claim a tax deduction for include:

  • lighting, heating and cooling;
  • costs of cleaning the home working area;
  • the decline in value (or, depreciation) of equipment, furniture and fittings in the area used for work. Small capital items costing $300 or less may be claimed in full by individuals i.e. does not need to be depreciated;
  • the cost of repairs to this equipment, furniture and furnishings; and
  • other running expenses, including computer consumables (such as a printer, paper, ink etc.) and stationery.

 

Phone and internet expenses

If employees use the phone or internet for work, they can claim a deduction for the work-related percentage of these expenses if they paid for these costs and have records to support their claims. As above, they will need to formulate a reasonable method of apportioning their work percentage of claims, ordinarily done in the form of a logbook demonstrating a usual pattern of work use.

 

As an alternative, a tax deduction of up to $50 with limited documents can be claimed based on a set rate for work-related use of:

  • 25 cents for calls made from a landline
  • 75 cents for calls made from a mobile
  • 10 cents for text messages sent from a mobile.

 

The shortcut method 

Since the beginning of 2020 Covid-19 made people working from home more intensively, the ATO has amplified the claim using the working from home shortcut method,

 

The shortcut method to claim tax deductions at a flat rate of 80c per hour.

 

This method is only available for hours worked from home from 1 March 2020 and unless extended, will apply to 30 June 2020. Claims before 1 March 2020 will need to be calculated using the above-mentioned methods.

 

This method covers all running costs (including depreciation, phone and internet costs), and there is no requirement to operate in a dedicated work area to claim a tax deduction under this method during the eligible time period.

 

 All that is required is a record of the hours worked from home. Further, multiple people in the same household working from home can each make a claim under this method.

 

 If a person worked from home prior to 1 March 2020, then they will need to use one of the other methods to calculate the claim for this period.

 

Home office occupancy expenses

Generally, an employee cannot claim a deduction for occupancy expenses, such as rent, mortgage interest, property insurance, land taxes and rates, unless their home office is a regular place of business. In the event that a home is a place of work, these expenses could be claimed, however, beware that claiming such expenses may have adverse tax consequences such as impacting the main residence CGT exemption.

 

Occupancy expenses can include:

  • Rent
  • Mortgage interest
  • Rates
  • House insurance

 

‘In order to claim occupancy expenses, you must be able to pass what the ATO refers to as the ‘interest deductibility test’

 

Frankly speaking, if you intend to claim a deduction on the interest you pay on your mortgage or rent paid to your landlord, the area you declare as your home office/place of business must have the ‘character’ of a place of business. It should meet the criteria, outlined by the ATO:

  • clearly identifiable as a place of business, for example, you have a sign identifying your business at the front of your house
  • not readily suitable or adaptable for private or domestic purposes
  • used exclusively or almost exclusively for carrying on your business
  • used regularly for visits by your clients.

 

How can BOA & Co. help?

If you need any assistance filing your tax return, contact BOA & Co. accountants in Chatswood on 02 9904 7886 so we can help address your personal circumstances.

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EOFY business tax guide

EOFY 2019/2020 Tax Planning Guide for Business

EOFY 2019/2020 is Approaching!

 

Is your business ready to save on tax claim?

Here are some top tips from BOA & Co.’s tax guide for small business owner when it comes to year-end tax planning:

Tax planning tips for small businesses:

  • Check with your accountant or bookkeeper on how you are doing for the financial year. Mark it in your diary to do this in May next year! so you can get on top of your business tax claims.

 

  • Prepay expenses or delay them until next year depending on your profit.

 

  • No money to prepay?  Order stock from suppliers and ask them to invoice you before 30 June.  (Check with your accountant first.)

 

  • For once, get large asset purchases before 30 June 2020 to get the higher $150,000 immediate write off instead of $1000 next year.

 

  • Make Superannuation payments for deductions in 2019/20 before 26 June, or to delay deductions make them after 30 June and before 28 July.

 

  • Consider stocktaking to get true values, and write off obsolete stock.

 

  • Private Company Loans: Any loan extending beyond 30 June must be documented and any payment terms followed.

 

  • Bad Debts: If your business wants to claim for bad debts, remember that they must be bad and written off before the end of the financial year. Bad debts cannot be claimed by taxpayers who recognise income on a cash basis.

 

  • Make sure you are on top of the PAYG Withholding tax scales for 2019/20 Click here for more details.

 

  • If you think you are going to pay bonuses, then write them down now and claim the deduction even if paid after 30 June.

 

  • Prepare to record Trust distributions before 30 June.  Many small businesses use trusts as part of their overall corporate structure, and the rules on distributions have tightened.

 

  • Over 60 and need a tax deduction in your business?  Consider putting your Super into Transition to Retirement mode and take 10 percent pension and re-contribute for a tax deduction.

 

  • Consider moving insurance cover into superannuation to maintain cover in hard times or make premiums more tax efficient. (See a planner as there are plenty of traps on this one.)

 

   If you are also an Investment property landlord please: 

    • Get your annual Income and Expenditure Statements from your agent.
    • Prepay for any Insurances for Buildings and Contents.
    • Prepay expenses for items like pest control (your pest controller should have vouchers).
    • Do any minor repairs now and bring forward the deduction.
    • If your property is new or less than 25 years old then make sure you have a depreciation schedule prepared by an authorised Quantity Surveyor.
    • Lodge your tax as early as possible to help ensure you receive your refund sooner.
    • Keep clear records of deductible interest and non-deductible as the tax office is clamping down.
    • Consider a PAYG variation for next year to bring forward the tax benefits throughout the year.

 

 

Do you need professional tax advisory assistance? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialist will be pleased to assist you.

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smsf annual returns, smsf tax claim

EOFY 2019/2020 Tax Planning Guide for SMSF Trustee

EOFY 2019/2020 is Approaching!

 

Are you ready to save on the SMSF tax claim?

Here are some top tips from BOA & Co. for SMSF trustee when it comes to year-end tax planning:

Tax planning tips for SMSF trustee:

  • Check the contributions of all members to this SMSF and to any retail or industry funds to ensure they’re below caps as they apply across all accounts.

 

  • Don’t forget that payment of premiums for Insurance in Super is considered contributions too!

 

  • Make sure Minimum Pensions took to include any increase because of consolidations.

 

  • Check that Pensions Reversionary or Binding Death Nomination is in place. If not, then restructure on July 1 to save on fees and charges.

 

  • Pensions started in June do not need to take a minimum pension for the year.

 

  • Those ages 55-59 and fully retired can consider taking part of their pension amounts as a lump sum.

 

  • In-specie transfer shares from your own names to the fund. This can also be treated as concessional contributions for self-employed if you don’t have the cash to make a deductible contribution

 

  • Consider Spouse and Co-contribution strategies for all eligible members.

 

  • Accumulation stage: Defer tax returns as long as possible.

 

  • Pension stage: Lodge as soon as possible to get those franking credit refunds!

 

   If you are also an Investment property landlord please: 

    • Get your annual Income and Expenditure Statements from your agent.
    • Prepay for any Insurances for Buildings and Contents.
    • Prepay expenses for items like pest control (your pest controller should have vouchers).
    • Do any minor repairs now and bring forward the deduction.
    • If your property is new or less than 25 years old then make sure you have a depreciation schedule prepared by an authorised Quantity Surveyor.
    • Lodge your tax as early as possible to help ensure you receive your refund sooner.
    • Keep clear records of deductible interest and non-deductible as the tax office is clamping down.
    • Consider a PAYG variation for next year to bring forward the tax benefits throughout the year.

 

Do you need professional assistance filing your tax returns? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our SMSF specialists will be pleased to assist you.

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personal family tax planning

EOFY 2019/2020 Tax Planning Guide for Personal/Family

EOFY 2019/2020 is Approaching!

 

Are you ready to save on personal and family tax claim?

Here are some top tips from BOA & Co. for Personal/Family when it comes to year-end tax planning:

Tax planning tips for personal and family:

  • First of all, please consider Job-keeper payment as part of your income.

 

  • Check superannuation contributions for the year to date to see what leeway you have.

 

  • Consider personal contributions for you and/or spouse. Check here for the benefits calculator.

 

  • Consider spouse contribution for spouse earning less than $37,000 for a personal tax offset of up to $540.

 

  • Prepay margin/investment loans before 29 June.

 

  • Prepay Income Protection insurance premiums to bring forward the personal tax deduction.

 

  • Review all other rebates such as childcare expenses, dependent spouse rebate, low-income rebate and the tax offsets for mature-age workers and senior Australians.

 

  • If you have a Capital Gain (lucky devil) then check other assets to see if you can trigger any losses to minimise gains.

 

  • Try to defer bonuses or income until new rates apply in 2019/20 and the flood levy is gone.

 

  • Review your own salary packaging arrangements for 2019/20 to ensure it’s within limits and correctly recorded.

 

  • Be smarter with Term Deposits and have them mature after the end of the financial year in the future.

 

  • Change savings accounts into the name of the lower-income spouse before the start of the new financial year to maximise your personal tax claims.

 

 

 

   If you are also an Investment property landlord please: 

  • Get your annual Income and Expenditure Statements from your agent.
  • Prepay for any Insurances for Buildings and Contents.
  • Prepay expenses for items like pest control (your pest controller should have vouchers).
  • Do any minor repairs now and bring forward the deduction.
  • If your property is new or less than 25 years old then make sure you have a depreciation schedule prepared by an authorised Quantity Surveyor.
  • Lodge your tax as early as possible to help ensure you receive your refund sooner.
  • Keep clear records of deductible interest and non-deductible as the tax office is clamping down.
  • Consider a PAYG variation for next year to bring forward the tax benefits throughout the year.

 

Do you need professional assistance filing your personal tax returns? Call BOA & Co. accountants in Chatswood on 02 9904 7886 and our specialist will be pleased to assist you.

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