Businesses can no longer claim deductions for payments to workers if they have not met their pay as you go (PAYG) withholding obligations. This applies to income tax returns lodged for the 2020 income year onwards. Any payments made to a worker where PAYG amounts haven’t been withheld or reported are called non-compliant payments.

If PAYG withholding rules require an amount to be withheld, businesses will need to:

• Withhold the amount from the payment before they pay their worker.
• Report that amount to the ATO.

Businesses will not lose their deduction if they:

• Withhold an incorrect amount by mistake. To minimise penalties businesses can correct the mistake by lodging a voluntary disclosure form.
• Withhold the correct amount but make a mistake when reporting, though mistakes should be corrected as soon as possible.
• Fail to report payments on a Taxable payments annual report (TPAR) or a payment summary annual report (PSAR).

Businesses will only lose their deduction if no amount is withheld or reported to the ATO unless voluntarily disclosed before the ATO examine their affairs.

This measure aims to create honest businesses and owners doing the right thing by their employees. This is part of the government’s response to recommendations from the Black Economy Taskforce.

Businesses that don’t comply with PAYG withholding and reporting obligations may lose the deduction for that payment and face penalties that apply for failure to withhold and report amounts under the PAYG withholding system.

Ensure you’re up to date on how to claim your working-from-home expenses!

As the business landscape shifts back and forth between office, hybrid and home-based work opportunities, it’s important to remember what methods are available to you when it comes to claiming. If part of your role allows you to work from home, you may be able to claim certain expenses on your tax return this year using one of the following methods.

The Revised Fixed Rate Method:

Under the revised fixed rate method, individuals can claim 67 cents per hour worked from home during the relevant income year. This rate includes additional running expenses, such as home and mobile internet or data, phone usage, and electricity and gas for heating, cooling, and lighting. Importantly, using this method, you cannot claim separate deductions for these expenses.

To use this method, taxpayers must maintain records of the total number of hours worked from home and the expenses incurred while working at home. Additionally, they must keep records of expenses not covered by the fixed rate per work hour, demonstrating the work-related portion of those expenses.

What Records Do You Need?

Previously, taxpayers required a dedicated workspace at home. From 1st March 2023 onwards, the record-keeping requirement has shifted again, necessitating the recording of all hours worked from home as they occur.

How Does The Fixed Rate Method Work?

To utilise the revised fixed rate method:

• Additional running expenses are incurred due to working from home.
• Keep records of total work-from-home hours and incurred expenses.
• Maintain records for expenses not covered by the fixed rate.

The Actual Cost Method:

Alternatively, taxpayers can opt for the actual cost method, where deductions are calculated based on actual additional expenses incurred while working from home. This includes expenses for depreciating assets, energy expenses, phone and internet, stationery, computer consumables, and cleaning dedicated home offices.

What Records Do You Need?

To claim work-from-home expenses using actual costs, you must maintain records showing:

• The actual hours worked from home during the entire income year or a continuous 4-week period represents your usual working pattern at home.
• Additional running expenses incurred while working from home.
• How you calculated the deduction amount.

How Does The Actual Cost Method Work?

To claim actual expenses:

• Incur additional running expenses due to working from home.
• Keep records showing expenses incurred and the work-related portion of those expenses.

Australians need to understand their entitlements and tax deductions while working remotely.

Consulting with a tax advisor can provide valuable insights into available concessions, deductions, and offsets for your tax return.

By staying informed and adhering to ATO guidelines, taxpayers can ensure compliance and make the most of available deductions in the evolving landscape of remote work. Why not start a conversation with us today?

With a new norm surrounding how Australians work (hybrid, remote or office-based), there has been a change in how work-related expenses will be claimed this year during tax season.

Where once the expenses and claims that needed to be made during tax return season could be more clearly defined in terms of business or pleasure, work-related expenses or personal expenditure, remote working and work-from-home employees need to keep careful records of what they can and cannot claim as “home office expenses”.

Previously, this could be claimed through the COVID-simplified 80 cents per hour, work-from-home method (known as the shortcut method and no longer available for the 2022-23 financial year), the ‘fixed method’ (previously 52 cents per hour, now 67 cents per hour) and the ‘actual method’.

With new changes to the methods in place from 1 July 2022, it’s essential that work tax deductions are correctly calculated and claimed and the process is duly followed.

Shortcut Method Is No Longer Available

The shortcut method introduced to simplify the process of claiming work-from-home expenses during the pandemic is no longer available.

Through this method, individuals could claim a fixed rate of $0.80 per hour worked from home, with the aforementioned shortcut method covering expenses such as phone, internet, and depreciation on furniture & equipment. If this shortcut method was employed, no other costs could be claimed for working from home.

Remember that for the 2022-23 financial year, you must claim any work expenses through the fixed rate or actual methods, not the shortcut method.

Revised Fixed Rate Method

The fixed method will increase from 52 cents per hour to 67 cents per hour. The ‘actual method’ can also still be used. You no longer need a dedicated workspace at home, but you must have a representative four-week diary of the hours worked from home between 1 July 2022 to 28 February 2023.

Many taxpayers will already have kept records, but if you haven’t, one way to do this would be to look back over your diaries for the past four weeks.

You may also be able to use other similar records you already have as evidence as long as they represent the hours they worked from home during those eight months.

From 1 March 2023, the record-keeping requirement has changed again, and you will be required to record all your hours worked from home in a diary or some other format as they occur. This can be in the form of timesheets, diaries, time recording apps, or any other similar document, provided it is kept as they occur.

How Does The Fixed Rate Method Work? 

To use the revised fixed rate method, you must:

• incur additional running expenses as a result of working from home
• have a record of the total number of hours you work from home and the expenses you incur while working at home
• have records for expenses the fixed rate per work hour doesn’t cover and show the work-related portion of those expenses.

You can claim 67 cents per hour you work from home during the relevant income year. The rate includes the additional running expenses you incur for:

• home and mobile internet or data expenses
• mobile and home phone usage expenses
• electricity and gas (energy expenses) for heating, cooling and lighting
• stationery and computer consumables, such as printer ink and paper.

The rate per work hour (67 cents) includes the total deductible expenses for the above additional running expenses. You can’t claim an additional separate deduction for these expenses using this method.

Australians must know their entitlements and tax deductions when working from home/remotely.

Speak with us to ensure you comply with your tax return obligations when claiming or for assistance with your tax return this financial year.

The ATO has developed a new rental property owners toolkit for property investors to ensure that mistakes are avoided in their tax returns.

Each year, the tax office identifies fairly common mistakes being made with tax claims made in regard to investment properties. In a recent review of individual tax returns, nine out of 10 taxpayers with a rental property were found to have made a mistake in their tax return.

The newly developed toolkit focuses on areas were mistakes are most commonly being made. These include:

• Renting out a room, a unit, or a whole house on an occasional basis through the sharing economy (such as Airbnb).
• Repairs, maintenance and capital expenditure.
• Any borrowing expenses incurred when taking out a rental property loan.
• Interest on a loan that is taken out to purchase a rental property.

One of the six fact sheets identifies the most common tax mistakes that will cost you time and money, and how you can avoid them. Some of the tips outlined in the toolkit include:

• Keeping the right records.
• Getting your capital gains right when selling.
• Getting construction costs right.
• Getting initial repairs and capital improvements right.
• Apportioning expenses and income for co-owned properties.

Each fact sheet within the toolkit is also available to be downloaded individually. The toolkit is designed to assist rental property owners to get the information they need in order to lodge correctly and to avoid any lodgement mistakes in the future.