Business Archives - Kasker Associates

Income Tax Rates

Sophie — Thu, 27 Jun 2024 06:01:31 +0000

Australian resident tax rates for 2022-2023 to 2025–26.

Australian Resident tax rates 2025–26

TAXABLE INCOME	Tax (not including 2% Medicare levy)
$0 – $18,200	Nil
$18,201 – $45,000	16 cents for each $1 over $18,200
$45,001 – $135,000	$4,288 plus 30 cents for each $1 over $45,000
$135,001 $190,000	$31,288 plus 37 cents for each $1 over $135,000
$190,001 and over	$51,638 plus 45 cents for each $1 over $190,000

Australian Resident tax rates 2024–25

TAXABLE INCOME	Tax (not including 2% Medicare levy)
$0 – $18,200	Nil
$18,201 – $45,000	16 cents for each $1 over $18,200
$45,001 – $135,000	$4,288 plus 30 cents for each $1 over $45,000
$135,001 $190,000	$31,288 plus 37 cents for each $1 over $135,000
$190,001 and over	$51,638 plus 45 cents for each $1 over $190,000

Australian Resident tax rates 2023–24

TAXABLE INCOME	Tax (not including 2% Medicare levy)
$0 – $18,200	Nil
$18,201 – $45,000	19 cents for each $1 over $18,200
$45,001 – $120,000	$5,092 plus 32.5 cents for each $1 over $45,000
$120,001 – $180,000	$29,467 plus 37 cents for each $1 over $120,000
$180,001 and over	$51,667 plus 45 cents for each $1 over $180,000

Australian Resident tax rates 2022–23

TAXABLE INCOME	Tax (not including 2% Medicare levy)
$0 – $18,200	Nil
$18,201 – $45,000	16 cents for each $1 over $18,200
$45,001 – $120,000	$5,092 plus 32.5 cents for each $1 over $45,000
$120,001 $180,000	$29,467 plus 37 cents for each $1 over $120,000
$180,001 and over	$51,667 plus 45 cents for each $1 over $180,000

Foreign resident tax rates 2024–25 & 2025–26

Taxable income	Tax on this income
0 – $135,000	30 cents for each $1
$135,001 – $190,000	$40,500 plus 37 cents for each $1 over $135,000
$190,001 and over	$60,850 plus 45 cents for each $1 over $190,000

Foreign resident tax rates 2023–24

Taxable income	Tax on this income
0 – $120,000	32.5 cents for each $1
$120,001 – $180,000	$39,000 plus 37 cents for each $1 over $120,000
$180,001 and over	$61,200 plus 45 cents for each $1 over $180,000

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Tax Calculators

Click here for Income tax estimator:

https://moneysmart.gov.au/income-tax/income-tax-calculator

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Latest tax changes 2025/26

Sophie — Thu, 27 Jun 2024 05:31:06 +0000

The corporate tax rate for companies are base rated entities is 25% from the 2022 and future years.
Work from home fixed rate: The fixed rate for work from home expenses for 2024–25 is 70c per hour.
Cents per kilometre increase
The cents per kilometre rate for work-related car expenses for 2024–25 is 88c per kilometre.
Electric vehicle home charging rate – plug-in hybrid electric vehicles
- From 1 July 2024, if you own and use a plug-in hybrid electric vehicle (PHEV) you can use the EV home charging rate to calculate the cost of charging your PHEV at home.
  - To use the EV home charging rate of 4.2c per kilometre to determine the cost of your electricity, you must:
    - have kept the relevant records for the income year
    - be claiming your car expenses using the logbook method or claiming your actual work-related vehicle expenses.
    - If you choose to use this rate and your vehicle doesn’t have the ability to accurately determine the home charging percentage, you can’t claim commercial charging station costs you incurred during the income year as a separate deduction.
  - Alternatively, you can choose to claim the electricity used for charging your PHEV by determining the actual cost incurred. Owners of zero emissions electric vehicles (EVs) can continue using the EV home charging rate provided they meet the relevant requirements.
    - (This guidance doesn’t apply to electric motorcycles or electric scooters).
From 2026, taxpayers won’t need receipts to claim a deduction of less than $1,000 for work-related expenses in their tax return (it is still $300 limit until 30 June 2026 F). While the ATO won’t ask you for receipts if your claim is below this amount, they may still ask you to explain what it was, how you paid for it, and how it is related to your work.
From 1 July 2024, Employer Superannuation Guarantee is to be increased from 11.5% of the gross wages.
From 1 July 2025, Employer Superannuation Guarantee is to be increased from 12% of the gross wages.
Businesses’ Instant write-offs:
1. As part of the Federal Government’s Coronavirus Stimulus Package, the Instant Asset Write-Off threshold is $20,000 (GST inclusive) per asset acquired. This change applies to businesses with an aggregated annual turnover of less than $10 million, where those assets are first used or installed ready for use after 1 July 2024.
“Technology Investment Boost” – deductions ended 30 June 2024.
Digitising “Taxable Payments Reporting” system
- From 1 January 2024, businesses can able to report Taxable Payments Reporting System data via their accounting software on the same lodgement cycle as their activity statements
Digitalising trust income reporting
- Trust and beneficiary income reporting and processing can digitalise with all trusts being provided with the option of lodging income tax returns electronically.
Selling and purchasing property
- From 1 January 2025 the foreign resident capital gains withholding (FRCGW) rate increased to 15% (ALL properties). Australian residents selling property need a clearance certificate to avoid having an amount withheld from the sale price.
Housing tax incentives – build to rent developments
- The housing tax incentives give owners and investors in large-scale eligible build to rent developments access to an accelerated deduction of 4% for capital works relating to build to rent developments and a concessional final withholding tax rate of 15% on eligible fund payments (amounts referrable to rental income and capital gains from the build to rent development). For more information, see ATO: Build to rent development tax incentives.

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Small business instant asset write-off extension

Sophie — Thu, 27 Jun 2024 04:39:50 +0000

From 9 May 2023, the Instant Asset Write-Off threshold is $20,000 (GST inclusive) per asset acquired. This change applies to businesses with an aggregated annual turnover of less than $10 million, where those assets are first used or installed ready for use after 1 July 2024.

Small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use from 1 July 2024.

Small businesses that have claimed immediate deduction for an asset under the simplified depreciation rules in a prior income year can also immediately deduct an amount included in the second element (cost addition) of that asset’s cost, where the amount is:

the first amount of second element cost incurred after the end of the income year in which the asset was written off
less than $20,000
incurred the cost and ready to use the asset(s) within the financial year.

The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that. In addition, pool balances under $20,000 at the end of 2023–24 income year will be able to be written off.

(above information is from the ATO publication QC 72501)

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New Work From Home Deduction Rules

Sophie — Tue, 27 Jun 2023 03:09:36 +0000

NEW WORK FROM HOME DEDUCTION RULES

From 1 July 2022, there are only two ways to claim deductions for ‘working from home’ expenses: the ‘fixed rate method’ or the ‘actual cost method’.

Three essential criteria:

the work must involve carrying on substantive employment duties or in carrying on business. Occasionally checking emails is not sufficient to meet this condition.
the taxpayer must have incurred deductible additional running expenses of a kind outlined below.
the taxpayer must meet the STRICT RECORD KEEPING requirement. The importance of actual records will be crucial – taxpayers cannot rely on estimations.

Method 1: Fixed Rate Method (from 2023 FY):

The ATO accepts the claim amount being 67 cents per hour working from home.

You should keep written records (diary or float chart) to record all of the work from home hours.

The fixed rate method covers the following expenses:

data and internet
mobile and home phone usage
electricity and gas
computer consumables (e.g. printer ink)
stationery.

That means, you can’t claim a separate deduction for any of the expenses the revised fixed rate includes.

What you can still claim separately:

the decline in value of assets used while working from home, such as computers and office furniture
the repairs and maintenance of these assets,
cleaning (only if you have a dedicated home office).

Method 2: Actual Cost Method:

If you have an “exclusive area for your work”, you may use the exact expense ratios to claim percentages of the running costs such as: home office equipment, computers, printers and telephones, heating, cooling and lighting; the costs of repairs to your home office furniture and fittings and portion of cleaning expenses. Employees cannot claim rent or mortgage repayments.

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Calculating the cost base of real estate

Sophie — Fri, 19 Nov 2021 02:27:12 +0000

To calculate a capital gain or capital loss, you need to know the cost base of your asset. The basic rules are the same for all assets, but some additional rules apply to calculating the cost base or reduced cost base of real estate.

There are a few rules to keep in mind when you calculate your capital gain or capital loss from real estate, in particular rules relating to:

the costs of owning
cost base adjustments for capital works deductions.

Costs of owning

You do not include rates, insurance, land tax, maintenance and interest on money you borrowed to buy the property or finance improvements to it in the reduced cost base. You only included them in the cost base if:

you acquired the property under a contract entered into after 20 August 1991 (or, if you didn’t acquire it under a contract, you became the owner after that date), and
you could not claim a deduction for the costs because you did not use the property to produce assessable income – for example, it was vacant land, your main residence or a holiday home during the period.

Example

On 1 July 2010, Kris purchased a block of land for $240,000 (including legal fees, stamp duty and related expenses). On 30 June 2015, he sold it.

During the five years he owned the block, he paid $25,000 for rates, land tax and interest. As he did not use the land to generate any income, he could not claim a deduction for any of these expenses.

The cost base of the block of land is $265,000.

End of example

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Work-related Travel Expenses

Sophie — Thu, 18 Nov 2021 09:01:16 +0000

In a general rule, travel expenses which are relevant to gain assessable income are deductible under s8-1 of ITAA to the extent that the expenses are not in a private or capital nature.

Travel within Australia:

A travel diary or similar documents are required for travel within Australia overseas if the employee, director or partner is travelling away from their ordinary residence for 6 nights or more.

No written evidence and travel records are required for travel within Australia if the person receives a travel allowance and claims no more than the amount considered reasonable by the ATO (TD2004/19).
http://law.ato.gov.au/atolaw/view.htm?docid=TXD/TD200419/NAT/ATO/00001

If there was no travel allowance paid by the employer, in other words, the allowance amount is not shown in the PAYG summary, the person claims more than the amount considered reasonable by ATO, all travel expenses must be substantiated.

Travel records include:

The nature of the trip
When does it begin?
The length of the trip, and
The destinations

Travel between home and work

In a general rule, travel between home and work is not deductible.

However the following situation may be deductible where:

Home is the place or employment and the travel is between two places of employments
The person’s employment effectively starts from home before leaving to the work place
Heavy tools or equipment stored must be stored at the person’s home at the end of each day and the person must take the equipment from home to his job each day
The person’s nature of work is of an itinerant nature and is required to go to different locations each day

Note: collecting mails on the way to work is not claimable as being insignificant.

Overseas travel

Employee s travelling overseas who received travel allowance still need to obtain written evidence of their travel expenses and detailed travel record if they are away from their ordinary residence for 6 nights or more. Regardless of the length of the trip when a reasonable claim is made, written evidence is required for overseas accommodation expenses, but not for food, drink and incidentals.

Crew members on international flights receiving travel allowance are excluded from this rule if they travel primarily outside Australia and the total expenses claimed do not exceed the ATO reasonable limits.

Reasonable claims for meals and incidentals when travelling overseas are only for employees who receive travel allowance. The reasonable amounts are available for employee only: TD2004/6.

http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20046/nat/ato/00001

Claims for non-employees on business trip must be fully substantiated for claims to be deductible.

The following table contended in TR2004/6 provides a summary of the substantiation requirements:

	Domestic Travel		Overseas Travel
Travel Allowance received and:	Written evidence	Travel diary	Written evidence	Travel diary
The amount claims does not exceed the reasonable allowance amount:
1. Travel less than 6 nights in a row	No	No	No	No
2. Travel 6 or more nights in a row	No	No	No	Yes
The amount claims exceeds the reasonable allowance amount:
3. Travel less than 6 nights in a row	Yes – for the whole claim	No	Yes	No
4. Travel 6 or more nights in a row	Yes – for the whole claim	Yes	Yes	Yes

DISCLAIMER

Kasker Associates website is to provide information of general interest to their clients. The content of this website does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

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Considering An Accounting Software?

Sophie — Wed, 03 Nov 2021 09:17:42 +0000

Managing your paperwork “more regularly” and “systematically” will surely save you a lot of time and tax bills.

Managing your small business is hard enough and staying on top of your finances is even harder. From sending invoices to paying bills, tracking expenses, managing daily transactions and paying. You are not an accountant and you do not have so much time to deal with numbers after a long day work.

A useful and easy operational accounting software can help you organising these tasks, so you can spend less time dealing with your finances and more time running your business. Remember that even having an accounting software, you will need to utilise it regularly by not putting off managing the tasks to the end.

If you are not the type of person who are able to cope with additional workload in dealing numbers, don’t worry. You will need more help from your bookkeeper and accountant to assist you to get your finance in order before they become out of control. You need to pay frequent visits to them or request them to meet you after-hour or at your premises if you are not able to leave your shop at all.

What to consider?

Every business will have different requirements from an accounting software. When choosing an accounting software consider the following:

Does the system calculate all payroll requirements (PAYE, annual leave, long service leave etc.)
Does the system track stock, work in progress, orders, jobs and other task management requirements
Will the system be able to handle multiple bank accounts
Does the system need to handle foreign currency
Does the system track separate financial records for each business or department within the business
Does the system allow for interface with other computer systems such as online payments
Does the system keep detailed records on customers including what they buy, how often they buy, when they buy etc (often referred to as a Customer Relationship Manager system).

Software options

There are many software packages on the market that allow business managers to successfully control records without an accounting degree. Some popular accounting systems used by small businesses are:

Setting up a bookkeeping system

When you set up your financial records you need to make sure they meet any compliance requirements such as GST or other tax compliance. This is done through setting up classifications, also known as a chart of accounts.

A chart of accounts is a listing of all the accounts needed to cover the financial transactions of the business. Classifications are used to separate profit and loss calculations to show where a business is making or losing money. It is also used to determine the overall financial position of a business in a balance sheet.

Getting advice

Even after you have set up your accounting system, you still need to check with your accountant or bookkeeper regularly so you know you are on the right track. It is always better to check with the professionals at the start of your business. A correct use of accounting software will save you time and tax bill for sure.

DISCLAIMER

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Running your business

Sophie — Wed, 03 Nov 2021 09:05:19 +0000

Taxation obligations is important when starting up a new business.

If you were employed before you started your business, you’ll find that your tax affairs now become a lot more complicated.

Various federal, state and local government taxes and rates can apply, depending on the size and location of your business.

While you pay tax on your income, you can claim legitimate business expenses. These are costs necessarily incurred in running your business and include such items as advertising, bank charges, computer supplies, insurance premiums, postage, printing and stationery, staff training expenses, sub-contracting costs, technical journals, telephone and other communication costs, and travel.

You’ll need to keep records relating to all transactions for at least five years and, in the case of records relating to the fringe benefits tax, for seven years.

Your professional advisers will help you set up an accounting system that is appropriate for the nature and scale of your business.

Some of the taxes that apply when you are in business include the following:

Pay As You Go (PAYG Installment)

PAYG is a system for businesses to pay instalments of their expected tax liability on their business and investment income during the financial year. PAYG instalments are usually paid quarterly.

Pay As You Go (PAYG Withholding)

Employers withhold PAYG withholding tax on behalf of the employees. The employees can claim against the amount withheld at the end of the financial year (called tax return).

Business owners may also have to withhold from payments to:

other workers, such as contractors
businesses that don’t provide their ABN

Single Touch Payroll

From 1 July 2018 and 2019, employers are required to report employees’ payroll information to the ATO each time a payroll is made through a STP-enabled software. Payroll information includes:

salaries and wages
pay as you go (PAYG) withholding
superannuation

Super Stream (employer super guarantee)

SuperStream is the new mandatary way businesses pay employee superannuation guarantee contributions to their super funds electronically in one go via super clearing house/super stream format that offered by many finance institutions and super funds.

Employers are no longer able to contribute super guarantees to the employee’s super account separately as they used to do.

SuperStream transmits money and information consistently across the super system – between (1) employers, (2) funds, (3) service providers and (4) the ATO. The data is linked to the payment by a unique payment reference number.

employers can make all their contributions in a single transaction, even if they’re going to multiple super funds
contributions and rollovers can be processed faster, more efficiently and with fewer errors
employees can view their super payments on MyGov.

Many financial institutes (e.g. banks), most super funds, ATO clearing house and accounting software (e.g. XERO, MYOB, QuickBooks & Payroller) offer super stream services.

Fringe Benefit Tax

Fridge Benefit Tax (FBT) is paid by employers on certain benefits they provide to their employees or their employees’ family or other associates. FBT applies even if the benefit is provided by a third party under an arrangement with the employer.

FBT is separate to income tax and is calculated on the taxable value of the fringe benefit. The employer must self-assess their FBT liability for the FBT year (that is, 1 April to 31 March) and lodge an FBT return.
Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. Employers can also generally claim GST credits for items provided as fringe benefits.

A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages. They are benefits given to employees such as:

allowing an employee to use a work car for private purposes
giving an employee a discounted loan
paying an employee’s gym membership
providing entertainment by way of free tickets to concerts
reimbursing an expense incurred by an employee, such as school fees
giving benefits under a salary sacrifice arrangement with an employee.

The following are not fringe benefits:

salary and wages
shares purchased under approved employee share acquisition schemes
employer contributions to complying super funds
employment termination payments (including for example, the gift or sale at a discount of a company car to an employee on termination) · payment of amounts deemed to be dividends under Division 7A
benefits provided to volunteers and contractors
exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.

Goods and Services Tax (GST)

You must register for GST if you are carrying on a business or enterprise and any of the following apply: your current or projected annual GST turnover is $75,000 or more ($150,000 or more for non-profit organisations), you provide taxi travel, you want to claim fuel tax credits, or you want to claim wine producer rebates. If your annual GST turnover is below $75,000, you can choose not to register for GST.

Where a business is registered, GST at the rate of 10 per cent must be added to the invoiced price of taxable supplies. The supplier collects GST from the customer. Only businesses registered for GST purposes can collect GST.

As a supplier, you may also be paying GST on purchases made to run your business. This can be claimed by way of what are known as input credits. You can account for GST on either a cash basis (when payment is received from customers) or an accruals basis (when customers are invoiced).

At the end of the period (monthly and quarterly options are available), your business will need to account for GST collected on taxable supplies and input credits which are being claimed. The difference between the two will determine the net GST to be paid or refunded. Reporting on this takes the form of a Business Activity Statement (BAS).

Every business needs to have an Australian Business Number (ABN). Businesses registered for GST are automatically given an ABN.

If you do not have an ABN, other businesses may be unwilling to deal with you because they may not be able to claim their GST input tax credits. Where an ABN cannot be quoted, other businesses will be required to withhold tax from payments made to you.

Lodging activity statements

Businesses use an activity statement to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Activity statements are also used by individuals who need to pay quarterly PAYG instalments.

Capital Gains Tax (CGT)

CGT is a tax imposed on any gains made on the disposal of an asset. There are special provisions for relief from CGT where the disposal of an asset occurs as the result of restructuring a business into a company. There are also special concessional provisions that relate to the disposal of a small business.

Before you purchase or sell an asset or a business, it is wise to seek professional advice to see if you qualify for any relief provisions. Professional advice can also help you plan ahead and manage your taxation responsibilities.

Your accountant or tax adviser will help you determine any other taxes that might affect you, including:

Income tax
Land tax
Payroll tax
Stamp duty
Fringe benefits tax
Superannuation guarantee levy.

Paperwork

Running a business inevitably involves some paperwork and you must make sure you comply with your tax obligations. By understanding the very basics, you can make this relatively pain free.

Managing invoices, payments and paperwork

When you operate a business, you have transactions where money flows into your business (receipts) and out of your business (payments). These transactions are supported by documents recording the details of the transactions, such as tax invoices, wages records, cheque butts and credit card statements. These documents contain the information you need to record, such as the date of each transaction, total payment or amount received or the amount of GST.

Managing cash flow

Cash flow is what keeps your business going. A good way to help make sure you have enough cash available at the right time to meet your tax, super and other obligations is to do a cash flow budget. We also have some tips to help you manage your cash flow better.

DISCLAIMER

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Starting A New Business

Sophie — Wed, 03 Nov 2021 08:36:34 +0000

Are you thinking of starting a business?

New Business Checklist

If you are, there are important factors you need to consider before committing yourself to anything:

Business plan & initial set-up

Do you need a business plan?

Have a business plan and financial plan is essential to success. You may wish to speak to the bank to obtain a financial assistance if necessary.

The structure of the business that is the best suited for the new business?

If your business is a company, register with the Australian Securities and Investment Commission (ASIC)

If your business is a partnership, create a formal partnership agreement, including a buy–sell agreement.

Register your business name if you wish to be known in a particular name by the general public as well.
You will need an ABN, TFN, or register for GST or PAYG. Register for GST and PAYG, if applicable. If your turnover will be less than $75,000 per annum, you may not need to register for GST.

Do you understand your taxation obligations for owning or running a business?
Do you need staff or contractors? Do you know all of the employer’s responsibilities, e.g employee’s pay as you go tax and superannuation guarantees lodgments.
You may need to consult with an accountant, lawyer, local council and other professionals to help you through the process of setting up a new business

You will need an ABN, TFN, or register for GST or PAYG

Check with the government and local council about necessary licenses or permits.
Check with NSW Fair Trading or your professional bodies if you need to obtain an additional practice s or permits, e.g. NSW Fair Trading Licensing and The Law Society, etc.
Join a trade association or chamber of commerce

Business Bank accounts:

After your business is set up, you will need to open new business bank accounts. Remember it is the best practice if you separate your personal banking from the business banking. This will save you a lot of time and money trying to sort out any confusions later.

A business cheque account for everyday banking
A high-interest account for surplus funds
A business credit card for business-related purchase.

Business borrowing: If your financial forecasts identified a need for borrowings, apply for a loan or line of credit. Again, a business banker can helpSet up your financial record keeping system is important, including an invoicing system and cash flow tracking system. Is cloud accounting a good idea for you?At the end of each quarter (for BAS clients) and end of the financial year, you are required to summarise all of the business income and expenses and complete the income tax return.
You will need to keep all of your business records for the minimum of 5 years.
Does the software provide payroll and GST function?
You may use an accounting software or your accountant’s bookkeeping help.
What record-keeping method you will be adopting?

Legal requirement and leasing

Arrange for business insurance, including public liability, vehicle, fire, burglary, professional indemnity and sickness
Choose premises, then negotiate a lease or purchase agreement in consultation with your solicitor
Arrange for connection of utilities such as electricity, water, telephone and gas
Arrange fit out and purchase business equipment, fittings and furniture
Buy stationery and office supplies
Buy supplies or trading stock and determine terms of payment, delivery and freight

Hiring staff

Start of employment:

You may have tax and superannuation obligations if you employ or contract workers into your business, either full-time or part-time. You must provide employees a Tax file number declaration on their first day of work.

Pay slips:

On payday you will need to determine the rate of tax that you need to withhold from payments you make

Paying Pay As You Go (PAYG) withholdings to ATO

Most wage reporting and PAYG payment responsibilities occur when you complete and lodge your activity statement, usually monthly or quarterly.

Termination of employment
If the employee is eligible for an employment termination payment (ETP), you will have additional PAYG withholding obligations.

Working out if you have to pay super

You must make super contributions for an employee if you’re considered an employer for super guarantee purposes and your employee is entitled to the super guarantee. At the present the super guarantee rate is 9.5% of the gross income.

Super guarantee payments are due quarterly are 28 Oct, 28 Jan, 28 April & 28 July.

Shortfall interest charge and fines apply for non-payment and late payments.

Late super contributions and the super guarantee charge are not tax deductible.

The above is overwhelming! We recommend you seek professional assistance before spending your money. It is important to be well-prepared and not to miss any steps.

It is time consuming to keep up with the ongoing taxation requirements. Failure to meet any of the tax obligations can cost you a great deal down the track. It is worthwhile getting things done professionally on the regular basis. A good tax advisor can save you a fortune as well.

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Home Office Deductions – for Employees & Business People

Sophie — Wed, 03 Nov 2021 07:33:29 +0000

HOME OFFICE DEDUCTION

For employees:

As an employee if you perform some of your work from a home office, you may be entitled to a deduction for the running costs including:

for home office equipment, such as computers, printers and telephones, the cost (for items costing up to $300) or decline in value (for items costing $300 or more)
work-related phone calls (including mobiles) and phone rental (a portion reflecting the share of work-related use of the line) if you can show you
- are on call, or
- have to phone your employer or clients regularly while you are away from your workplace
heating, cooling and lighting
the costs of repairs to your home office furniture and fittings
cleaning expense

An employee can’t claim a deduction for occupancy expenses, including rent, mortgage interest, council rates and house insurance premiums.

Method 1: The ATO accepts the claim amount under a fixed flat-rate/per hour (also have a diary showing working hours).

Method 2: You may use the exact expense ratios to claim percentages of the running costs like: home office equipment, computers, printers and telephones, the cost (for items costing up to $300) or decline in value (for items costing $300 or more), work-related phone calls (including mobiles) and phone rental (a portion reflecting the share of work-related use of the line) if you can show you are on call, or have to phone your employer or clients regularly while you are away from your workplace; heating, cooling and lighting; the costs of repairs to your home office furniture and fittings and portion of cleaning expenses.

Record you need to keep:

All receipts for:

home office equipment used for work purposes
repairs to the home office or furniture and equipment used for work purposes
cleaning expenses of home office
any other day-to-day running expenses for the home office

Records of home expenses.

HOME OFFICE

Running Business From Home:

Where your home is also your place of business, you can claim deductions if you carry out income-producing work at home and incur expenses in using your home for that purpose.

You can claim a deduction for the following:

Running costs:

The cost of using a room’s utilities, such as gas and electricity – which must be apportioned between business and private use, based on actual usage.

Business phone costs – if a telephone is used exclusively for business, you can claim for the rental and calls, but not the installation costs. If the telephone is used for both business and private calls, you can claim a deduction for business calls.

Decline in value (depreciation) of office plant and equipment, such as desks, chairs, computers. If equipment such as a computer is also used for non-business purposes, your claim must be apportioned between business and private use.

Decline in value (depreciation) of curtains, carpets and light fittings.

Ocupancy expenses:

(Such as rent, mortgage interest, insurance, rates). You can claim the portion of these costs that relates to the room or workshop you use as a place of business. A common method of working out how much to claim is the floor area (as a proportion of the floor area in your whole home).

If your employer has an office in the city or town where you live, your home office will not be a place of business, even if your work requires you to work outside normal business hours.

If your income includes personal services income (PSI), you may not be able to claim a deduction for occupancy expenses.

Capital gains exemption reduced

Generally, you can ignore a capital gain or loss you make when you sell your home or main residence (under the main residence exemption).

However, you don’t get the full main residence exemption if your home is your principal place of business, although you’re probably entitled to a partial exemption.

To work out the capital gain that is not exempt, you need to take into account a number of factors including:

Proportion of the floor area of your home that is set aside to produce income
Period you use it for this purpose
Whether you’re eligible for the ‘absence’ rule (see Treating a dwelling as your main residence after you move out)
whether it was first used to produce income after 20 August 1996.

If you first used your home as your place of business after 20 August 1996, the period before you first used your home to produce income is not taken into account in working out the amount of any capital gain or capital loss. Instead, you use the market value of your home at the time you first used it to produce income.

It’s a good idea to get a valuation of your home at the time you first use it as your place of business, so that when you come to sell it you don’t pay more capital gains tax than necessary.

The following table set out the deductions you may be able to claim if your home is not your principal place of business.

Deductions you may be able to claim	You do have a work area	You don’t have a work area
Cost of using a room’s utilities such as gas and electricity	Yes	Yes
Work-related phone costs	Yes	Yes
Decline in value (depreciation) of office plant and equipment such as desks, chairs and computers	Yes	Yes
Decline in value (depreciation) of curtains, carpets and light fittings	Yes	No
Occupancy expenses such as rent, mortgage interest, insurance and rates	Yes	Yes

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