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Claiming tax when working from home

The ATO is seeking to increase their attention on home office expenses due to the high level of questionable claims made by taxpayers. There has been an increase in the number of Australians claiming deductions for costs incurred from working from home.

The ATO reports that in the last tax year 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’, including expenses relating to working from home.

The main mistakes stem from individuals claiming the whole instead of the work-related portion of expenses for bills related to phone, internet, printing and stationery.

The ATO has identified that a separate work area will incur work-related expenses eligible for tax deductions as opposed to answering some emails at a kitchen bench. The ATO has also recommended recording expenses in case of an audit or if the ATO contacts your employer to confirm your claim.

To ensure you do not suffer non-compliance penalties, the ATO recommends you follow the three golden rules for taxpayers working from home. One- you must have spent the money yourself and not been reimbursed, two- the claim must be directly related to earning your income, and three- you need a record to prove it.

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Self-managed super funds (SMSF) aren’t just about financial investment

December 3, 2020

Individuals may be looking to opt for an SMSF because these provide entire control over where the money is invested. While this sounds enticing, the downside is that they involve a lot more time and effort as all investment is managed by the members/trustees.

Firstly, SMSFs require a lot of on-going investment of time:

Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that compared to other superannuation methods, is a lot more time occupying.

Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review has shown that on average, the operating cost of an SMSF is $6,152. This data is inclusive of deductible and non-deductible expenses such as auditor fee, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.

Thirdly, investing in SMSF requires financial and legal knowledge and skill. Trustees should understand the investment market so that they can build and manage a diversified portfolio. Further, when creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super and other relevant regulations requires a basic level of understanding at the very least. Finally, insurance for fund members also needs to be organised which can be difficult without additional knowledge.
Although SMSFs have the advantage of autonomy when it comes to investing, this comes at a price. Members/trustees need to invest time and money into managing the fund and on top of this, are required to have some financial and legal knowledge to successfully manage the fund.