How to claim your homework.

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What’s changed?

The ATO stated that you always had to have a dedicated home office in order to claim any working from home expenses.

After 1 July 2022

Now the ATO have said that you no longer need a home office to claim deductions for working from home. Setting up the laptop on the kitchen table is now acceptable.

Fixed Rate method

This method involves using the hours actually worked from home to cover a variety of costs.

Pre 1 July 2022 – 52c/hour

The fixed rate covered:

  • electricity & gas
  • home office depreciation
  • cleaning of the dedicated home office

In addition to this, you could also claim the work use portion of your:

  • data & internet
  • mobile & home phone usage
  • computer consumables
  • stationery
  • depreciation of work related items such as computers

This was the method most accountants used, as it’s easier than calculating the home office electricity usage. You were required to keep a diary for 4 weeks of the year to prove how you came to your total hours.

After 1 July 2022 – 67c/hour

This method now includes:

  • data & internet
  • mobile & home phone usage
  • electricity & gas
  • computer consumables
  • stationery

In addition to this you can claim:

  • decline in assets such as computers and office furniture
  • repairs and maintenance of said assets
  • cleaning (if you have a dedicated office)

You are required, from 1 March 2023, to keep a diary all year to now substantiate the hours you claim.

Shortcut Method – 80c/hour

This was introduced in recognition of everyone working from home during COVID-19. It was available for use from March 2020 until 30 June 2022.

It covered everything! Which meant it wasn’t always the most tax effective – unless the boss was paying for your mobile phone bill and supplying your equipment and furniture.

  • data & internet
  • mobile & home phone usage
  • electricity & gas
  • computer consumables
  • stationery
  • decline in assets such as computers and office furniture
  • repairs and maintenance of said assets
  • cleaning (if you have a dedicated office)

Actual Method – always available

A lot more record keeping is required for this method – but it’s absolutely worth it.

This involves keeping a record of what actual hours you work from home. The ATO requires you keep a 4 week diary every year to substantiate your claim (they didn’t increase this to a whole year, unlike the fixed rate method from 1 March 2023). Using this, you can claim the business/work use of everything.

  • data & internet
  • mobile & home phone usage
  • electricity & gas
  • computer consumables
  • stationery
  • decline in assets such as computers and office furniture
  • repairs and maintenance of said assets
  • cleaning (if you have a dedicated office)

This is now the accountants preferred method as it results in the highest deduction. But if you don’t have good records, we will use the Fixed Rate Method – be warned!

Keeping Records

No matter what method you use, you have to be able to prove it. Keep a diary on you desk for 4 weeks of the year (or the whole year if you’re using fixed rate) and write down your start and finish times, go through your phone bill for a month and compare private vs business calls to determine your deductible percentage. Try and record your Facebook scrolling vs work research on your phone or home computer for internet deductible percentage. And last but not least, don’t be afraid to make a claim – if you’re actually using these things to generate an income, you can claim it!

Make use of the ATO myDeductions App to help you out with recording your expenses too, especially the big purchases like a computer or phone.

This only a short guide on how to maximise your homework – please contact us for a more tailored approach to your specific needs.

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BOOST TIME! Small business technology investment boost and skills and training boost.

Changes to the boost is now a Federal law – from June 2023

On 29 March 2022, as part of the 2022–23 Budget, the then government announced it would support small business through these new measures. The measures became law on 23 June 2023. The technology investment boost and skills and training boost for small businesses are now operational and must be applied.

Time to Boost!

Small business technology investment boost

Small businesses (with an aggregated annual turnover of less than $50 million) can deduct an additional 20% of the expenditure incurred for the purposes of business digital operations or digitising its operations on business expenses and depreciating assets such as portable payment devices, cyber security systems or subscriptions to cloud based services.

This measure applies to expenditure incurred in the period commencing from 7:30 pm AEDT 29 March 2022 until 30 June 2023. An entity can claim the boost for expenditure on a depreciating asset only if the asset is first used, or installed ready for use, by 30 June 2023.

An annual $100,000 cap on expenditure will apply to each qualifying income year. Businesses can continue to deduct expenditure over $100,000 under existing law.

Eligible expenditure may include, but is not limited to, business expenditure on:

  • digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks
  • digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design
  • e-commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth
  • cyber security – cyber security systems, backup management and monitoring services.

Where the expense is partly for private purposes, the bonus deduction can only be applied to the business-related portion.

You cannot claim the following expenses towards the boost:

  • salary and wages
  • capital works costs
  • financing costs
  • training or education costs (these may be eligible for the Small business skills and training boost)
  • expenses that form part of your trading stock costs.

Small business skills and training boost

Small businesses (with an aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia. Businesses may continue to deduct expenditure that is ineligible for the bonus deduction in accordance with the existing tax law.

The expenditure must be:

  • for the provision of training to employees of your business, either in-person in Australia, or online
  • charged, directly or indirectly, by a registered external training provider that is not you or an associate of yours
  • already deductible for your business under taxation law
  • incurred within a specified period (between 7:30 pm AEDT or by legal time in the ACT on 29 March 2022 and 30 June 2024).

The bonus deduction is available for expenditure for the provision of training to one or more employees of your business. The training provider must meet certain registration criteria for the bonus deduction.

You can check for registered providers at:

You cannot claim the following expenses towards the boost:

  • training of non-employee business owners such as sole traders, partners in a partnership or independent contractors
  • costs added on an invoice by an intermediary on top of the cost of training, such as commissions or fees, as they are not charged directly or indirectly by the registered training provider.

If you have any questions regarding these coming changes – de Kretser is here for you.

Need more information?
If you need assistance understanding how the comparison information relates to your circumstances, we are here to help, so please contact us for further information.

We look forward to working with you.

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Trusts – Are they still worth it?

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The recent ATO crackdown on trusts will no doubt have some business owners (and even some advisors) asking themselves the question: Is this structure for business purposes still worth it?

To recap, trust distributions have been under the ATO microscope in recent years. The latest ATO crackdown was in February 2022 when it updated its guidance around trust distributions especially those made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, the ATO may potentially take an unfavourable view on what were previously understood to be legitimate distribution arrangements.

The ATO is chiefly targeting arrangements under section 100A of the Tax Act; specifically, where trust distributions are made to a low-rate tax beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary, usually with a higher tax rate.In this regard, the ATO’s Taxpayer Alert illustrates how section 100A can apply to the quite common scenario where a parent benefits from a trust distribution to their adult children. Despite this new ATO interpretation and the wider crackdown on trusts in recent years, the choice of a trust as a business structure still has a range of benefits including:

■Asset protection– Limited liability is possible if a corporate trustee is appointed. Usually, when a person owes money and cannot meet their payment requirements, the creditor can access the person’s personal assets to recoup the debt payable. However if a trust is in place, there is no access to beneficiary assets 50% CGT discount– A family trust receives a 50% discount on capital gains tax for profits made from selling any assets the trust has held for more than 12 months. This contrasts with a company structure. Companies cannot access the 50% CGT discount.

■Tax planning– Income that sits in the family trust that is not distributed by year-end is taxed at the highest income tax rate. However, any trust income distributed to the beneficiaries is taxed at the income tax rate of the beneficiary who receives the distribution. The way to definitely get around the ATO’s aforementioned section 100A crack down is to ensure the distributed money actually goes to the nominated beneficiary and is enjoyed by the beneficiary rather than another taxpayer

■Carry-forward losses– A trust does not distribute losses to beneficiaries. This means the beneficiaries will not be called upon to contribute money to the trust to meet any loss. Instead, losses from each year can be carried forward to the following year, subject to certain conditions being met.

Common mistakes made by family trusts that will attract the ATO’s attention include:

  • Purported distributions to tax-advantaged organisations, such as charities, that are not beneficiaries;
  • The trustee failing to make year-end trust distributions until after June 30;
  • The trustee incorrectly calculating trust income, or mischaracterising income and gains; and
  • Family trust election not being made in time or failing to properly specify the beneficiary, resulting in tax benefits going outside the family group.

This only a short guide to possible issues that may arise regarding Trust – please contact us for a more tailored approach to your specific needs.

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Maximise Your Rental Claims – A Quick Guide to Repairs, Maintenance and Capital Works

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Repairs and maintenance


The cost of repairs and maintenance may be deductible in full in the year you incur them if both
•the expense directly relates to wear and tear or other damage that occurred while renting out the property
•the property either –
– continues to be rented on an ongoing basis
– remains available for rent, but there’s a short time when the property is unoccupied (for example, where unseasonable weather causes cancellations of bookings or all reasonable efforts to attract tenants were unsuccessful).

Repairs
Generally, repairs must relate directly to wear and tear or other damage that occurred while renting out the property and can be claimed in full in the same year you incurred the expense.
Examples of repairs include:
•replacing broken windows
•repairing electrical appliances or machinery
•replacing part of the guttering damaged in a storm
•replacing part of a fence damaged by a falling tree branch.

Maintenance
Maintenance generally involves keeping your property in a tenantable condition. It includes work to prevent deterioration or to fix existing deterioration.
Examples of maintenance include:
•repainting faded or damaged interior walls
•oiling, brushing or cleaning something that is otherwise in good working condition (for example, oiling a deck or cleaning a swimming pool)
•maintaining plumbing.

Capital expenditure that may be claimable over time.

Capital allowances
Depreciating assets are items that can be described as plant, which don’t form part of the premises. These items are usually:
•separately identifiable
•not likely to be permanent and expected to be replaced within a relatively short period
•not part of the structure.


When claiming a deduction for decline in value for each asset, you can choose to use either:
•the effective life the Commissioner has determined for these types of assets
•your own reasonable estimate of its effective life.

Where you estimate an asset’s effective life, you must keep records to show how you worked it out.
Examples of assets decline in value include:
•floating timber flooring
•carpets
•curtains
•appliances like a washing machine or fridge
•furniture.

Capital works
Capital works describes certain kinds of construction expenditure used to produce income. The rate of deduction for these expenses is generally 2.5% per year for 40 years following construction.

Capital works include:
•building construction costs
•the cost of altering a building
•major renovations to a room
•adding a fence
•building extensions such as garages or patios
•adding structural improvements like a driveway or retaining wall





This only a short guide to possible gains – please contact us for a more tailored approach to your specific needs.

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Should you need assistance, please do not hesitate to contact us.
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How to claim an early tax deduction on SG contributions

Are you an employer who needs to make superannuation guarantee (SG) contributions for your employees? If so, it may be worthwhile bringing forward these SG contributions to before 1 July to benefit from a tax deduction this financial year. However the timing of when SG contributions are deductible to an employer can be tricky if employers pay SG contributions for their employees via a superannuation clearing house (SCH).

RECAP – WHAT IS A SCH?

The ATO’s free Small Business Superannuation Clearing House (SBSCH) is the only ‘approved’ clearing house – none of the many commercial clearing houses have this status. The SBSCH is a free service that small businesses with 19 or fewer employees, or an annual aggregated turnover of less than $10 million, may use to make superannuation contributions to employees.The SBSCH aims to reduce compliance costs for small business employers by simplifying and streamlining the process of making employee superannuation contributions, by allowing employers to make a single lump payment of their contributions to the SBSCH each quarter. That lump sum payment is broken into individual payments by the SBSCH, and then contributed to each employee’s respective super fund or RSA superannuation account.

TAX DEDUCTION AVAILABLE FOR EMPLOYERS

Employers can claim income tax deductions for SG contributions made to a superannuation fund on behalf of their employees, subject to certain conditions being met. As the income tax deduction is available in the financial year the contribution is made, some employers may wish to improve their current year tax position by bringing forward the June quarter SG contributions to before 1 July, even though these SG contributions are not due until 28 July 2023.

TAKE CARE IF YOU USE A SCH

As mentioned above, SG contributions are tax deductible in the year in which they are made. That said, a contribution is not made until it is received by the fund, and when that happens depends on the way in which the contribution is made. This is clear cut where an employer pays SG contributions directly to an employee’s nominated superannuation fund. That is, the contribution will be made when it is received by the fund.

However, the timing of the tax deduction and when the contribution counts towards the employee’s contribution cap is not as straightforward where SG contributions are made to a SCH for all employees. Here, the SCH electronically transfers SG contributions to employees’ funds on the employer’s behalf. In this situation, the contribution is not made at the time the clearing house is credited with the funds from the employer. Rather, the contribution is made and therefore deductible when the funds are credited to the respective employee’s superannuation fund (following an electronic transfer of money from the clearing house) and then allocated to the employee.

BEWARE OF TIMING DELAYS

The ATO is aware that there may be a period of time between an employer’s payment to the SBSCH and superannuation fund receiving the contribution. Further, the SBSCH may be unavailable over a weekend close to the end of the financial year for scheduled system maintenance. This means that payments made towards the end of a financial year may not be received by an employee’s superannuation fund in the same financial year. This may therefore impact when an employer is entitled to an income tax deduction for the SG contributions

ACTION ITEMS FOR EMPLOYERS

For those employers who do not use the SBSCH but instead use commercial clearing houses, for the contributions to be deductible in 2022/23, it is recommended that it be made up to 21 days before the end of the financial year.

For employers who make contributions directly to their employees’ superannuation funds, the contributions should be made a few days before the end of the financial year to ensure they are received before 1 July and therefore deductible in the current financial year.

If you have any questions regarding these coming changes – de Kretser is here for you.

Need more information? Please contact us quickly so that we can help you ensure all entitlements are finalised – and you do not miss out.

We look forward to working with you.

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Temporary Full Expensing: get in quick!

Temporary Full Expensing (TFE) encourages and supports businesses by allowing an immediate deduction for the business portion of the cost of a depreciating asset.

There is no cost threshold – the whole cost of the asset can be written off in the relevant year. However, cars can only be depreciated up to the car limit which is currently $64,741. The car limit does not, however, apply to vehicles fitted out for use by people with a disability. For background, a ‘car’ is defined as a motor vehicle designed to carry a load of less than one tonne and fewer than nine passengers (excluding motorcycles and similar). Therefore, for those vehicles, the car limit has no application, and full depreciation is available.

Benefits

The principal benefit of TFE is cashflow. TFE enables businesses to bring forward their depreciation claims, and therefore their deductions upfront, into a single year rather than having them spread out over multiple future years. Ultimately, this assists cashflow which itself is one of the main challenges faced by businesses.

Eligibility

The vast majority of businesses including sole traders, will be eligible for TFE as their aggregated, annual turnover will be less than $5 billion. Until 30 June, 2023, under TFE, businesses can claim both new and second-hand depreciating assets where those assets are used or installed ready for use for a taxable purpose.

From a timing standpoint, this means you will not be eligible for TFE in this financial year if you merely order or pay for an eligible asset before 1 July, 2023 – rather, the asset must be used or installed ready for use in your business before this date.

Eligible assets

  • Computers, laptops and tablets, printers
  • Wireless routers and Wi-Fi mesh and extenders
  • Tools and equipment
  • Cash registers/POS systems
  • Machinery
  • Security Systems
  • Office Furniture (free standing) and business equipment

There are however some ineligible assets as follows:

■ buildings and other capital works for which a deduction can be claimed under the capital works provisions in division 43 of the Income Tax Assessment Act 1997

■ trading stock

■ CGT assets

■ assets not used or located in Australia

■ where a balancing adjustment event occurs to the asset in the year of purchase (e.g. the asset is sold, lost or destroyed)

■ assets not used for the principal purpose of carrying on a business

■ assets that sit within a low-value pool or software development pool, and

■ certain primary production assets under the primary production depreciation rules (including facilities used to conserve or convey water, fencing assets, fodder storage assets, and horticultural plants (including grapevines)).

Business plan

Because under TFE you cannot claim any extra depreciation deductions than under the standard depreciation rules, you should stick to your business plan and only continue to buy assets that align with that plan and that you were contemplating buying anyway…and then enjoy the cashflow benefits of TFE.

If you have any questions about TFE – especially around asset eligibility and timing leading up to 30 June please call us immediately – and we will help you to obtain your maximum amounts.

de Kretser is here for youyour time is precious, we will make it count.

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Working from Home – The New Fixed Method explained.

The Australian Taxation Office (ATO) has announced new updates on how one can claim expenses for working from home. From 1 July 2022 onwards, you can choose either to use the ‘actual cost’ method or a new ‘fixed rate’ method (67 cents per hour) based on what best matches your scenario. No matter what method you choose, you have to collect and maintain certain records to access the claim. 

The ABS Characteristics of Employment provides information on whether people usually work from home. The concept of working from home stems from pre-pandemic times and includes people who did so: to catch up on work; as part of a flexible work arrangement; to reduce overheads/have a home office; or as part of their employment conditions. The proportion of people who usually work from home has increased from 30% in 2015 to 41% in 2021. It is expected that some of the recent increase could be explained by the COVID-19 pandemic. However, the estimates were generally trending upwards before this time.

Data is released every two years and can be analysed by industry, based on a person’s main job (most hours worked per week). In August 2021, the five industries with the largest proportions of people who usually worked from home were:

  1. Financial and Insurance Services (77%)
  2. Professional, Scientific and Technical Services (70%)
  3. Information Media and Telecommunications (65%)
  4. Education and Training (61%)
  5. Rental, Hiring and Real Estate Services (61%).

The first issue for claiming expenses is that there needs to be a link between the expenses you incurred – and the method you make money. If an incurred expense doesn’t match your work or only half relates to your work, you won’t be able to claim the full expense as a deduction.

On the other hand, the second issue is that you have to incur expenses related to working from home.

The New ‘Fixed Rate’ Method

Previously, there were two fixed-rate methods for the 2021-22 income year:

  • A cover-all 80 cents per hour rate for costs incurred when you work from home (it was valid from 1 March 2020). This Covid-19-related rate was likely to cover all additional overhead costs linked to working from home, or
  • If you had space for work but you were not running your business from home, you could access 52 cents per hour while you worked from home to cover the running expenses of your home. However, this rate doesn’t cover certain items, including depreciation of electronic devices that can be claimed separately. 

From the 2022-23 financial year onwards, the Australian Taxation Office has merged these two fixed-rate methods to come up with one revised method that can be accessed by anyone working from home, irrespective of whether they are working at the kitchen table or have a dedicated space. 

67 cents per hour is the newly announced rate and it covers your energy expenses (gas and electricity), phone usage (home and mobile), stationery, internet, and computer consumables. You are allowed to separately claim deductions of the expense of the decline in assets’ value such as computers, maintenance, and repairs for these assets, and on the other hand, if you have a dedicated home office, it will include the cost of cleaning the office. If more than one person is working from the same home, each person can claim using the fixed rate method if they meet eligibility criteria.

What proof does the ATO need that you are working from home?

The ATO requires A record of hours for the income year – this can be in any form, provided it is kept contemporaneously. For example, records may be kept in one of the following forms:

  • timesheets
  • rosters
  • logs of time the taxpayer spent accessing employer systems or online business systems
  • time-tracking apps
  • a diary or similar document kept contemporaneously.

Furthermore, you also need to maintain a copy of at least one document for every expense you incurred during the year that is covered by the fixed rate method.

It could include bills, invoices, or credit card statements.

Keeping records of running expenses

The taxpayer must also keep evidence for each of the additional running expenses that they incurred.

For energy, mobile and home phone and internet expenses, the taxpayer must keep one monthly or quarterly bill. If the bill is not in the taxpayer’s name, they will also have to keep additional evidence showing they incurred the expenses, e.g. a joint credit card statement showing payment or a lease agreement showing they share the property, and therefore the expenses, with others.

For stationery and computer consumables, which are occasional expenses, the taxpayer must keep one receipt for an item purchased.

Each household member who contributes to the payment of an expense that is listed on a bill in the name of one person but the cost is split will be considered to have incurred it. You need to maintain these records so you can prove your claim. If you don’t have this proof at that time, you will not be able to claim deductions. 

According to the ATO, you will no longer be able to give estimates or a sample diary over four weeks to claim work-from-home deductions. From 1 March 2023, you will have to show the actual hours you worked from home.

Keeping records for decline in value

As the decline in value of depreciating assets is not covered by the revised fixed-rate per hour, to claim a deduction for decline in value the taxpayer must keep the written evidence required by Div 900 or the ITAA 1997 

An employee must keep, for each depreciating asset, a document which shows:

  • the name or business name of the supplier
  • the cost of the asset
  • the nature of the asset
  • the day the asset was acquired
  • the day the record was made out.

The taxpayer must also keep records which demonstrate their work-related use of the depreciating asset. This can be evidenced by records of a representative four-week period that show personal and income-producing use of the depreciating assets.

For depreciating assets used in carrying on a business, they must keep records that record and explain all transactions.

If you have any questions regarding these changes – de Kretser is here for you.

Need more information?
If you need help with consolidating your information to achieve maximum return – please contact us.

We look forward to working with you.

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New ‘work from home’ Deduction Rules – all you need to know.

The ATO has issued new draft guidelines around a new method (the revised fixed rate method) of calculating work-from-home running expenses from 1 July 2022 (as an alternative to calculating the actual work-related portion of all running expenses). 

The new revised fixed rate method will replace both:

■the 52 cents fixed-rate method for electricity and gas expenses, home office cleaning expenses and the decline in value of furniture and furnishings,

■the short-cut (COVID-19) 80 cents method (for all additional running expenses).

You are eligible to use the revised fixed-rate method from 1 July 2022 if you:

■work from home to fulfil your employment duties or to run your business (a separate home office or dedicated work area is not required)

■incur additional running expenses that are deductible, and

■keep and retain records of the time spent working from home and of the additional running expenses incurred.

New rate

The new rate of 67 cents (replacing the fixed rate of 52 cents was “based on the Australian Bureau of Statistics (ABS) household expenditure survey with consideration of annual Consumer Price Index (CPI) weightings”. It allowed 52c per hour for each hour a taxpayer worked from their home office to calculate their electricity and gas expenses, home office cleaning expenses and the decline in value of furniture and furnishings. In addition, a separate deduction for the taxpayer’s work-related internet expenses, mobile and home telephone expenses, stationery and computer consumables and the decline in value of a computer, laptop or similar device could be claimed.

The revised 67 cent fixed rate under the new rules is inclusive of:

■internet expenses

■mobile and/or home telephone expenses, and

■stationery and computer consumables.

The inclusion of these expenses within the revised fixed rate, when coupled with the current high inflation environment, means that there is a high likelihood that taxpayers may be worse off when moving from 52 cents to 67 cents.

Record keeping

From 1 January 2023, will see the need for you to keep a record of the actual hours worked from home (e.g. timesheets, rosters or a diary kept contemporaneously). This is more onerous than the 52 cent method where you only needed to keep a record to show how many hours you worked from home.

The ATO under the new revised fixed rate method also requires evidence in relation to each of the running expenses listed above.

For energy, mobile and/or home telephone and internet expenses, one bill per item needs to be retained.

If the bill is not in your name, additional evidence is needed to prove that you incurred the expenditure. For stationery and computer consumables, one receipt needs to be kept for an item purchased.

Under the new method, the amount that can be claimed will potentially be lower, while the compliance obligations are higher – the taxpayer not only needs to keep a record of times spent working from home, but also there is a need to keep an invoice/receipt for each of the additional costs, such as an electricity bill. 

This is a new requirement which never formerly existed under either of the replaced fixed rate methods. While the new draft guidance offers a transitional arrangement until December 2022, individuals currently availing themselves of the 52 cent fixed rate method will need to consider whether they can meet the additional administrative burden from 1 January 2023, or whether the “actual expenses” method is amore achievable alternative.

Contact Us

If you are uncertain which method is best for you please contact us directly to discuss your circumstances.

Please do not hesitate to get in touch and one of our de Kretser members would love to help you in the right direction.

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