The proportion of people working from a home office environment over recent months has never been greater, and with this trend likely to continue for some time yet, there are a number of deductions taxpayers should be aware of prior to lodging their tax returns.
Any expenses that have been incurred because people are working from home following the lockdown can potentially be claimed as a tax deduction. Many workers will notice a marked increase in expenses such as their electricity and gas bills, as well as one-off purchases such as home desks, chairs, lap tops and computers, and printers.
Deductible running expenses include:
- Utilities such as heating and lighting
- Cleaning costs for the work area
- Mobile or landline phone expenses for work calls
- Internet connection
- Stationery and computer accessories such as print cartridges
- Repair costs for home office equipment and furniture
- Depreciation of home office equipment, computers, furniture and fittings
- Small capital items such as a computer (purchased for the purpose of working from home) can be claimed if they cost under $300. If the cost exceeds $300, the decline in value can be deducted.
Importantly, the ATO has introduced a new method for calculating home office expenses, where people can claim expenses at a rate of 80 cents for each hour worked from home as a result of the lockdown. The shortcut will apply from 1 March 2020 to 30 June 2020.
Taxpayers will need to keep a record of hours worked, such as timesheets or rosters and as an alternative, they can still use existing deduction methods, albeit these are more time consuming. Any costs can be apportioned to the extent that they are work related.
Effective tax planning strategies can assist with both minimising tax bills and increasing the likelihood of a refund from the ATO. As a general rule, taxpayers should also aim to lodge a tax return early if a refund is expected as it not only ensures prompt processing, but can help with reducing any ongoing quarterly tax instalment payments.
Lastly, superannuation planning should also be front of mind come EOFY. Here are five super strategies:
1. Add to your super – and claim a tax deduction
If you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for this financial year – and potentially pay less tax. And at the same time, you’ll be boosting your super balance.
2.Get more from your salary or a bonus
If you’re an employee, you may be able to arrange for your employer to direct some of your pre-tax salary or a bonus into your super as a ‘salary sacrifice’ contribution.
3.Convert your savings into super savings
Another way to invest more in your super is with some of your after-tax income or savings, by making a personal non-concessional contribution. Although these contributions don’t reduce your taxable income for the year, you can still benefit from the low tax rate of up to 15 per cent that’s paid in super on investment earnings.
4. Get a super top-up from the Government
If you earn less than $53,564 in the 2019/20 financial year, and at least 10 per cent is from your job or a business, you may want to consider making an after-tax super contribution. If you do, the Government may make a ‘co-contribution’ of up to $500 into your super account.
5. Boost your spouse’s super and reduce your tax
If your spouse is not working or earns a low income, you may want to consider making an after-tax contribution into their super account. This strategy could potentially benefit you both: your spouse’s super account gets a boost and you may qualify for a tax offset of up to $540.
You’ll need to meet certain eligibility conditions before benefitting from any of these strategies. If you’re thinking about investing more in super before 30 June, talk to your HLB contact.
This article was published in the 2020 Winter edition of Financial Times.