Tax deductions

Tax period: the best way to make WFH tax deductions


Avoiding that shortcut and doing the extra work could make a huge difference to what you get in return. Find out how to do it.

Australians can get $ 1,000 in extra deductions on their tax return due to a huge trend that has swept the country – working from home.

While there are a number of ways to make a claim, one of them is guaranteed to get you more, according to Mark Chapman, director of tax communications at H&R Block.

Tax deductions for working from home have been the main area of ​​growth this year, while tax deductions for motor vehicle use, accommodation and travel are down,” he said. .

The Australian Taxation Office offers an 80 cents per hour “shortcut method” for working from home, but the catch all system means you might be missing out.

Alternatively, you can use the existing ATO flat-rate allowance to work from home for 52 cents per hour, which could earn you more, Chapman said.

What can you claim as a WFH deduction?

You can claim a tax deduction for the work-related proportions of household costs for a number of things.

These include heating, air conditioning and lighting bills and the costs of cleaning your home workspace, including cleaning supplies or paying for a home cleaner if needed.

There is also the depreciation of home office furniture and accessories and even the costs of repairing equipment. You can also claim depreciation of office equipment and computers.

Small capital goods such as furniture and computer equipment costing less than $ 300 can be immediately written off, while computer consumables like printer ink and stationery can also be deducted.

There are also telephone charges, including mobile and / or landline charges, and internet expenses which may also be on your deduction list.

The different methods

If you claim to use the 80 cents per hour formula, you will need to keep a record of the number of hours you have worked from home due to Covid-19, Mr Chapman said.

But you can’t make any other complaints about working from home, so things like cell phone use and internet are included in the 80-cent rate, he warned.

The flat-rate homework allowance of 52 cents an hour covers the additional costs of heating, air conditioning, lighting and declining furniture value, he said.

“All you have to do to claim this is keep a journal – note the time you start work each day, the time you finish work each day, and the breaks. You can then claim 52 cents per hour for every hour of work, ”he said.

“In addition, and this is what differentiates this rate from the 80 cent rate, you can also make separate claims for the proportion of work-related items such as home internet, mobile phone charges, depreciation of computer equipment and stationery.

“These additional costs often make it a preferred method, as the amount of the claim is often much larger than using the 80-cent rate.”

There is also another option where you can claim the actual costs you incurred, but it also involves a bit more work.

“You will need to keep a log of your home working hours for a typical 12 week period and you will also need to calculate the square footage of your home per floor area you use as your workspace,” Chapman said. .

“From there, you can then calculate your household’s share of work-related expenses and apply that percentage to the actual amount you spend on electricity, gas, water, telephone and internet.

“You will also need to keep all original invoices to prove your claim. This usually produces a larger claim than either flat rate method, but the amount of paperwork and calculation involved is much more.

On average, people who have worked from home all year round can expect a deduction of about $ 1,500 using the 80-cent hourly rate, he said.

“However, the average deductions for those claiming the 52-cent rate plus additional deductions for telephone, Internet, stationery, and depreciation of telephone equipment are at least $ 2,600. This is a significant difference that translates on average into tax savings of over $ 350, ”he said. “If you use the actual rate, your deduction is often even larger, averaging over $ 3,000 if you’ve worked from home all year.

An extra easy of $ 1000

The low and middle income tax compensation is also worth easy $ 1,000 when you file your tax return, Chapman said.

If your taxable income reaches $ 126,000, you’ll get some or all of the low and middle income tax compensation, he said.

This is how it works.

Basically if your income is less than $ 37,000 you will receive $ 255.

If your income is between $ 37,001 and $ 48,000, the tax deduction will steadily increase to $ 1,080. Between $ 48,000 and $ 90,000, you will get the maximum of $ 1,080.

Earn over $ 90,000 and the compensation gradually wears off, disappearing after $ 126,000.

You must file your tax return in order to get the compensation.

Winners and losers in the coming year

According to Chapman, people earning between $ 45,000 and $ 90,000 should be rewarded in the coming year on their taxes.

“The combination of the tax cut in last year’s budget and the extension of tax compensation for low and middle income means they’re $ 2,160 better this year,” he said. -he declares.

Small businesses have also offered a tax lifeline. The corporate tax rate fell 1% from July 1, 2021, which means it is now 25%, which is good for investment and productivity, Chapman said. .

But that’s not all good news.

Small business shareholders are among the losers. If they receive dividends, they will be franked at a maximum of 25 percent, which means they will have more personal taxes to pay, warned Chapman.

“The sleight of hand of corporate tax cuts is that while it results in lower taxes for the company, it also results in higher taxes for shareholders – therefore, overall, it’s a smaller tax cut and more tax redistribution, ”he said. Explain.

People who claim the use of a car, accommodation or work-related travel are also losers, he added, as the pandemic will almost certainly have significantly reduced the size of your claim.

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