Businesses that fail to keep accurate records may struggle to remain compliant at tax time and incur financial penalties from the ATO.
Follow the ATO’s record keeping guidelines to stay organised.
Basic organisation tips:
Keep records electronically (if possible)
Keep evidence of all transactions
Take photos of paper receipts to avoid faded records
Keep all business records including income, expenses and bank records- you generally need to keep them for five years
Keep your business records separate from your personal records
Financial tips:
Make sure business records include cash, online, EFTPOS, bank statements, credit and debit card transactions
Records should be kept of sales and other business income and business expenses which can be claimed as a deduction
Keep records showing when you use business purchases for private purposes, which will help you work out the business portion you can claim as a deduction
Use the ATO record keeping evaluation tool to review your record-keeping practices from time to time and see if you’re still on the right track
Ensure you’re up to date on how to claim your working-from-home expenses!
As the business landscape shifts back and forth between office, hybrid and home-based work opportunities, it’s important to remember what methods are available to you when it comes to claiming. If part of your role allows you to work from home, you may be able to claim certain expenses on your tax return this year using one of the following methods.
The Revised Fixed Rate Method:
Under the revised fixed rate method, individuals can claim 67 cents per hour worked from home during the relevant income year. This rate includes additional running expenses, such as home and mobile internet or data, phone usage, and electricity and gas for heating, cooling, and lighting. Importantly, using this method, you cannot claim separate deductions for these expenses.
To use this method, taxpayers must maintain records of the total number of hours worked from home and the expenses incurred while working at home. Additionally, they must keep records of expenses not covered by the fixed rate per work hour, demonstrating the work-related portion of those expenses.
What Records Do You Need?
Previously, taxpayers required a dedicated workspace at home. From 1st March 2023 onwards, the record-keeping requirement has shifted again, necessitating the recording of all hours worked from home as they occur.
How Does The Fixed Rate Method Work?
To utilise the revised fixed rate method:
Additional running expenses are incurred due to working from home.
Keep records of total work-from-home hours and incurred expenses.
Maintain records for expenses not covered by the fixed rate.
The Actual Cost Method:
Alternatively, taxpayers can opt for the actual cost method, where deductions are calculated based on actual additional expenses incurred while working from home. This includes expenses for depreciating assets, energy expenses, phone and internet, stationery, computer consumables, and cleaning dedicated home offices.
What Records Do You Need?
To claim work-from-home expenses using actual costs, you must maintain records showing:
The actual hours worked from home during the entire income year or a continuous 4-week period represents your usual working pattern at home.
Additional running expenses incurred while working from home.
How you calculated the deduction amount.
How Does The Actual Cost Method Work?
To claim actual expenses:
Incur additional running expenses due to working from home.
Keep records showing expenses incurred and the work-related portion of those expenses.
Australians need to understand their entitlements and tax deductions while working remotely.
Consulting with a tax advisor can provide valuable insights into available concessions, deductions, and offsets for your tax return.
By staying informed and adhering to ATO guidelines, taxpayers can ensure compliance and make the most of available deductions in the evolving landscape of remote work. Why not start a conversation with us today?