Tag Archives: Tax

Proposed changes to working-from-home deductions

MANY OF YOU will now be accustomed to claiming expenses incurred whilst working from home (WFH), a lot of this largely due to the lockdown measures put in place during the early years of the pandemic.
With much of the workforce WFH, the Australian Taxation Office (ATO) instigated an $0.80 per work hour “shortcut method” for claiming home expenses from March 1, 2020, to June 30, 2022.
The shortcut method has been very popular, as the expenses included could be claimed based on the production of a timesheet or work diary — much simpler than the Fixed Rate Method or Actual Cost Method.

New guidelines in development

The ATO is in the final stages of updating the methods available to claim WFH expenses for the 2022/23 tax year and beyond.
The Claiming a deduction for additional running expenses incurred while working from home — ATO compliance approach PCG 2022/D4 document is a good indicator of what taxpayers looking to claim WFH expenses in the 2022/23 financial year can expect.
I have reproduced key points from this document; these new guidelines will likely take effect from July 1, 2022.
The draft guidelines indicate that from July 1, 2022, the $0.80 method and its predecessor, the $0.52 per hour rate, will no longer be available and will be replaced with the Revised Fixed Rate of $0.67 per hour.
The ATO will allow taxpayers to continue to claim their actual expenses or use the Revised Fixed Rate Method, as explained below:

  • You do not need to have a separate home office or dedicated work area set aside in your home in order to rely on the information in this guideline.
  • If more than one taxpayer in your household is working from home at the same time, each taxpayer will be able to rely on the guideline provided that each taxpayer meets the requirements for deductibility.
  • Taxpayers working in the same household at the same time can choose to use either the revised fixed rate or actual expenses method.
  • If you do not use the revised fixed rate method, you will need to use the actual expenses method.
  • The information should be interpreted to be in effect from July 1, 2022

The Revised Fixed Rate Method covers the following additional running expenses you incur on a fair and reasonable basis by using the revised fixed rate of $0.67 per hour worked from home.

  • Energy expenses (electricity or gas) for lighting, heating/cooling and electronic items used while working from home.
  • Internet expenses
  • Mobile and/or home phone telephone expenses, and
  • Stationery and computer consumables

To calculate your total deduction for running expenses using the Revised Fixed Rate Method you:

  1. a) Calculate the number of hours you worked from home during the income year based on your records.

For only the 2022/23 income year, you need to keep:

  • A record representative of the total number of hours worked from home from July 1, 2022, to December 31, 2022.
  • A record of the total number of actual hours you worked from home for the period January 1, 2023, to June 30, 2023.

Note, for 2023/24, and later years, you must keep a record for the entire income year of the actual number of hours you worked from home during that income year.

  1. b) Multiply the total number of hours you worked from home during the income year by 67c per hour.
  2. c) Calculate the work-related decline in the value of any depreciating assets that you used to work from home during the income year and any other running expenses incurred and not accounted for in the 67c per hour rate.
  3. d) Add the amounts calculated from b) and c) above, and this total will be the amount you claim as your deduction for working from home at D5 in your Work Related Expenses Schedule of your tax return.

Further information can be obtained from the Draft Practical Compliance Guideline PCG 2022/D4; it can be found on the ATO website or by entering the above title into your search engine.
Note that the document is still in its draft form but is indicative of what will be legislated; please check the ATO website or ask your financial advisor for details when it reaches its final form.

The content of this article is not intended to be relied upon as professional advice and should not be used as such.
If you have any questions, you should consult a registered tax agent.
Brian Spurrell B A, B Com, Dip Ed, FCPA,  Registered Tax Agent.
Director, Personalised Taxation & Accounting Services Pty Ltd
PO Box 143 Warrandyte 3113
0412 011 946
www.ptasaccountants .com.au

Time to prepare for tax time in 2022 —Part 2

LAST MONTH this column explained the importance of getting your deductible expenditure records in order, to ensure you maximise your work-related deductions.
It focused on the two options available for claiming work-related motor vehicle expenses.
This month’s column will explain the three alternative methods for claiming home office expenses at label D5 in your tax return.
During the 21/22 financial year, many of you would have been required to or would have elected to work from home and most likely incurred significant additional expenses.
You may have received financial support either by reimbursement of specified costs such as Zoom software or computer/office equipment or by way of a specified allowance.
Employer reimbursements for out of pocket home office expenses are neither treated as assessable income or the expenses claimable as allowable deductions.
The provision of an employee working from home allowance will appear on your income statement provided by your employer or available from your ATO myTax account.
This allowance is taxable income and must be disclosed in your tax return in the salary or wages section in the box labelled Allowances.

Alternative options for claiming working from home expenses

To offset the tax on your allowance, you will need to claim deductions at D5 for the actual costs you have incurred; three methods for doing this have been outlined below.

a: The temporary COVID hourly rate of 80 cents per hour method.
This simple method requires minimal record-keeping and applies from March 1, 2020, to June 30, 2022, and I expect it will be extended to June 30, 2023.
If you elect to use this method, enter “COVID hourly rate” in the Description box — the letter H in the expense type box — and enter 100 in the business per cent box.
You should also indicate how you derived the number of hours worked in the space provided.
The 80 cents rate per hour covers all costs associated with working from home, including heating and cooling, electricity, cleaning, mobile phone, internet, computer consumables, and office furniture and equipment depreciation.
You cannot claim separately any other costs of working from home.
Apart from simplicity, the other advantages of this method are:

  • You don’t need to have a separate or dedicated area of the home set aside for working as a private study.
  • If the household has more than one resident working from home, they can also claim under this method.
  • The only records required to be kept are time records such as diary records, timesheets, rosters, or any employer documents setting out required working hours and dates you commenced and ceased working from home.

b: The 52 cents per hour rate plus expenditures not included in the hourly rate method.
This alternative method prevailed prior to March 1, 2020, and is still available and may be preferred when significant costs are incurred that are not fully recovered by the 80 cents hourly rate method.
Home office expenses covered in the 52 cents hourly rate are running costs, including electricity and gas and depreciation of office furniture.
Other costs that may be claimed separately include office stationery and supplies, telephone and internet, and depreciation of office equipment such as computers, printers, scanners et cetera.
However, a disadvantage of this method is that you will need to apportion the costs not covered in the 52 cents rate between work-related usage and private usage.
For guidance on acceptable methods for apportioning phone, computer and internet expenses, go to the ATO website and search for document QC 46119.
This method is often favoured because it avoids the need to record and apportion gas and electricity and may regain popularity again once the 80 cents COVID hourly rate ceases to be available.

c: The actual expenses method.
The equation:
(Expense x percentage of floor area) x percentage of weeks the area used for work
This method may be used as an alternative to claiming 52 cents per hour for running expenses such as lighting, heating, cooling, and cleaning.
You will need to work out the floor area of the part of your home that is used exclusively for work purposes and calculate that as a percentage of the total floor area.
Next, work out the percentage of the year you have used your dedicated work area or study for work-related purposes — after allowing for days in the year the work area was not utilised due to weekends, holidays, or illness — and then apply the reduced percentage to the amount of each of the above running costs.

Example:
Annual electricity cost is $5,600, the study area as a proportion of total floor area is 12 per cent.
Total weeks the study was used (in the financial year) for work purposes after allowing for four weeks of holidays and one week for illness is 47 out of 52 weeks which is 90 per cent.
Therefore, the deductible portion of the annual electricity bill claimed would be:
(5600 x .12) x .90 = $605.

Choosing a method

Suppose you cannot quantify your deductible home office expenses using either the 52 cents per hour method (method b) or the actual expenses method (method c).
In that case, I suggest you use the 80 cents method (method a), but make sure you can demonstrate how you arrived at the number of hours you worked at home.
If you have significant running costs but have insufficient expenditure records, you may prefer to use method b.
However, you will still need to work out the deductible portion of all other home office costs.
If you elect for method c, you must have records to show how you have calculated the work-related portion and have evidence of the costs incurred.
Claiming home office expenses is one area of your tax return where diligence on your part in retaining records and using the method that gives you the highest deduction may be well worth the effort.

The content of this article is not intended to be relied upon as professional advice and should not be used as such.
If you have any questions, you should consult a registered tax agent.
Brian Spurrell B A, B Com, Dip Ed, FCPA, CTA, Registered Tax Agent.
Director, Personalised Taxation & Accounting Services Pty Ltd
PO Box 143 Warrandyte 3113 Ph: 0412 011 946
www.ptasaccountants.com.au

When will I receive my 2019 tax assessment?

THERE ARE two significant changes this year that may delay the time when your tax return can be processed and assessed.
If you are anticipating a tax refund, then be prepared for the refund to hit your bank account later than you may be expecting.

The Impact of Single Touch Payroll Reporting (STP)

Commencing  July  1 , 2018 , employers with 20  or  more employees have been required to report their payroll details to the ATO on a real time basis each pay period.
Employers with less than 20 employees may have voluntarily elected to adopt this real time reporting system.
Employers will have until July 31, 2019 to finalise their STP data for the 2018/19 financial year, with that date to change back to July 14 each year subsequently.
So how might this change affect you?
If your employer has been reporting under STP you will no longer receive a Payment Summary (also previously known as a Group Certificate) but instead will be replaced by an Income Statement that you will need to access through your myGov account or your tax agent.
For the current year only, you may not be able to access this information until as late as July 31. Furthermore, consistent with prior
years, other pre-fill data including dividends, interest, share disposals, and private health insurance cover details are progressively uploaded on to the ATO systems and may take time to be finalised.
If you receive income from trust funds this information is often not available until late September.
From July 1, 2019 STP reporting will be extended to include all businesses with employees other than family businesses comprising only family members as employees, who may report on a quarterly basis together with the lodgment of their quarterly BAS.
Furthermore, if proposed measures announced in the 2019/20 Federal Budget become law, from July 1, 2020, STP data collected by the ATO will be expanded and shared with other Commonwealth agencies to ensure individuals receiving Government benefits are paid their
correct entitlements.

The Low and Middle Income Tax Offset (LAMITO)

Taxpayers with taxable incomes below $37,000 have for many years been entitled to a non-refundable Low Income Tax Offset (LITO) of $445 phasing out to zero at a taxable income of $66,666.
In the April 2019 Federal Budget t h e C o a l i t i o n G o v e r n m e n t foreshadowed the introduction of a new additional tax offset (LAMITO) to provide additional temporary nonrefundable tax relief to low income earners and also encompassing a new level of temporary tax relief to middle income earners to be available for the 2019 to 2022 income years.
At the time of writing this column, this foreshadowed legislation is yet to go before Parliament, but current undertakings from the Opposition suggest that the legislation will be supported.
N e v e r t h e l e s s , t h e b u d g e t proposal could be subject to some amendments in order to pass through both Houses of Parliament.
Should the legislation as outlined in the budget pass unchanged then individuals with a taxable income under $37,000 can expect an additional non-refundable LAMITO of $255 making a total LITO and LAMITO of $700.
The amount of the L AMITO increases for taxable incomes above $37,000 to reach a maximum of $1080 at a taxable income of $90,000, thereafter reducing at the rate of 3% of the excess taxable income over $90,000.
If your tax return is processed and assessed prior to the proposed LAMITO legislation passing through both Houses and receiving Royal Assent, your tax return would subsequently need to be amended by the ATO to accommodate the impact of the LAMITO on your 2019 assessment.
This therefore is the second reason you may choose to delay lodging your tax return until after July 31 or later until the LAMITO tax offset becomes law and ATO systems are updated to accommodate any changes from the proposed legislation as outlined in the Budget.
Please remember both of the tax offsets explained above are nonrefundable.
This means that you must have incurred a tax liability and either paid PAYG tax instalments through the year or your employer has withheld PAYG tax from your wage or salary during the year.
If not, then the tax offsets will be an offset against your unpaid tax liability reducing the tax payable on your tax assessment.
If your employer has withheld tax sufficient to cover your tax liability, the tax offsets will reduce (offset) your tax liability thus producing a tax refund.
If you use a tax agent to prepare your tax return, the above factors may explain why your tax agent chooses to delay lodging your tax return this year until all relevant pre-fill tax information is available to download into your tax return and thus avoid the added expense of having to lodge an amended return.

The content of this article is not intended to be used as professional advice and should not be used as such.
B r i a n S p u r r e l l F C PA , C TA ,
Registered Tax Agent, is Director
o f Personalised Taxation & Accounting Services Pty Ltd.
PO
Box 143 Warrandyte 3113.
Mobile: 0412 011 946

bspurrell@ptasaccountants.com.au,
www.ptasaccountants.com.au