Tax Tips Archives - BUSY01 and First Class Accounts Ovens and Murray

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Work from Home Shortcut Claim Extended

Work From Home Shortcut Claim Extended

Good news if you work from home.

The shortcut method* for calculating work from home deductions has now been extended to 30 June 2021. (*Practical compliance guideline PCG 2020/3.)

The guideline covers working from home and incurring additional running expenses in relation to your income-producing activities during the COVID-19 pandemic.

Originally introduced in April 2020, the guideline was first due to expire on 30 June 2020 (which was then extended to September 2020, and then to the end of December 2020). Interestingly, unlike previous extensions, the PCG no longer states whether further consideration will be given to extend the latest end date.

The shortcut method

The shortcut method contained in the PCG provides a rate of 80 cents per hour for running expenses and only requires taxpayers to keep a record of the number of hours worked from home. This could be in the form of timesheets, rosters, a diary or similar document that sets out the dates and hours worked. A notation stating “COVID-hourly rate” will need to be placed next to your deduction for home office expenses in the 2019/20 and 2020-21 return.

All told, the PCG now applies from 1 March 2020 to 30 June 2021. Taxpayers eligible to use this new shortcut method are employees and business owners who:

  • work from home to fulfil their employment duties or to run their business during the period from 1 March 2020 to 30 June 2021 and
  • incur additional running expenses that are deductible under s 8-1 or Div. 40 of the ITAA 1997.
    Running expenses include: electricity, gas, computer consumable such as printer ink, cleaning expenses, telephone, internet, depreciation on computers and other equipment (e.g. chairs, desks, filing cabinets).

Taxpayers who use this method, cannot claim any other expenses for working from home for that period.

Example

Jay is an employee who is working from home as a result of COVID-19. He purchases a computer on 5 April 2021 for $900. He marks in his diary when he commences and finishes work each day and also the length on any breaks he takes. All told, from his records he calculates that he worked 355 hours through to 30 June 2021.

Provided he retains his diary entries and receipt for the computer purchase, Jay’s 2020-21 deduction under the new shortcut method is $284 (355 hours x 80 cents).

Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method, and must use the pre-existing methods as follows:

Method 2 - the fixed rate method. 

Under this method, you claim all of the following:

  • a rate of 52 cents per work hour to cover heating, cooling, lighting, cleaning and depreciation of office furniture
  • the work-related portion of your actual phone and internet expenses, computer consumables, stationery, etc
  • the work-related portion of depreciation on a computer, laptop or similar device.
Method 3 – the actual cost method. 

Under this method, you claim the actual work-related portion of all your running expenses, which need to be calculated on a reasonable basis.

The methods are not mutually exclusive across the financial year. It may be the case that you use more than one method during 2019-20 and 2020-21.

For example, you could choose methods 2 or 3 for the period July 2020 through to February 2021, and then choose the shortcut method for the period from March through to the end of June 2021.

Feel free to talk to us if you need more information.

Reporting PAYGW

Reporting PAYGW correctly

Reporting PAYGW Correctly 

PAYG and claiming tax deductions

From July 1 2019, If you don’t meet PAYG withholding obligations for your workers, by not withholding tax from their payments and not reporting it to the ATO, you could lose your tax deduction.

This will apply to income tax returns lodged for the 2020 financial year and beyond.

If you withhold tax from payments to workers, you must withhold the required amount and report correctly to the ATO in order to receive a tax deduction for your business.

PAYG withholding and reporting obligations apply to payments for:

  • Salary, wages and other payments to employees
  • Directors' fees
  • Religious practitioner payments
  • Labour hire arrangements
  • Voluntary withholding arrangements
  • Payments to contractors with no ABN

Withholding rules still apply to cash payments. Similarly, for non-cash payments such as property or exchange of services, withholding rules still apply even if your worker agrees to receive a non-cash payment in place of money.

PAYGW

The payment of PAYGW to the ATO is a separate issue. The new rules are aimed at getting employers to report correctly and on time. Once you have reported an amount to the ATO, they expect payment of that obligation by the due date.

If you make an honest mistake, such as treating an employee as a contactor, you won’t be penalised. You can correct your mistake by lodging a voluntary disclosure

Talk to us

Contact us to review your PAYGW reporting obligations. 

Getting your business records ready

Getting your business records ready.

There is a lot to deal with at the end of the financial year, so it's good business to get your 2019 records in order before you get stuck into the next tax year!

What records do you need to have ready?

  • Have you bought or sold assets? If so, you need full details of acquisitions and disposals.
  • Have you taken out a new loan or other finance? You must have details of the finance arrangements and statements of monies owing at 30 June.
  • Check that any bonds or deposits paid or received have been allocated correctly.
  • Have you prepaid for insurance or other large business expenses that need to be apportioned to the following financial year? Make note of the portion applicable to the current financial year.
  • Do you carry stock? If so, did you perform a full stocktake at 30 June (unless you qualify for the simplified trading stock rules).
  • List any bad debts to be written off or pursued.
  • Do you have loans with related entities? You need to reconcile the loans to and from each entity to ensure the same value is reported in the accounts of both entities.
  • Ensure that all payments to company directors have been correctly captured.
  • Review your debtors and creditors (accounts payable and receivable). Is the list current and accurate?
  • If contact details of business owners and key personnel have changed let us and your accountants know.

There may be other matters to discuss such as capital gains, vehicle usage, private usage apportionment or superannuation.

Remember you need to keep all your business records for seven years, so store everything securely and where possible electronically for safety and ease.

Talk to us today about how we can help you get your records ready for your accountant. 

Home Office

Do you have a home office?

Do you have a home office?

If you have a home office for your business, you should be able to claim some of the costs involved in maintaining, owning and using your home.

It’s important to be aware of what you can and can’t claim, and the record-keeping involved in making a claim.

How does it work?

In order to claim, the space you use must be used primarily for your business.

This doesn’t mean setting up at the kitchen table from time to time, it means having a dedicated space that you work from.

If you are selling online and storing stock, you may also be using other spaces in your house for storage or stock maintenance. Or, if you are making or creating products, you may be using other areas like your kitchen or workshop.

Costs that you might be able to claim include:

  • home office equipment
  • repairs to the home office or work-related furniture and equipment
  • cleaning expenses
  • any other day-to-day running expenses for your home office.

You may also be able to claim the costs of some trips in your car if these are from your home office to other locations where you are carrying out business.

The ATO has developed a calculator tool, to help you better understand what you might be able to claim. View the tool here.

Keeping track of your costs

Make sure you keep a record of all your expenses. It’s important to keep your personal and business expenses separate. Consider using online accounting software so the paperwork is kept in good order.

We can help you review your home office expenses to make sure these are included when you claim.

Talk to us, we can help.