Daniel Rickard

With the range of technology and software available today, it’s become easier than ever to work from home. Employees can efficiently complete calls using teleconferencing software, many collaboration tools are now cloud based, and work devices, including laptops and tablets, are light and portable.

If you’ve been working from home, you’ve likely also set up a dedicated work area, and you’re using your own electricity and resources to power your workday. But which of these items can you claim in your next tax return to ensure you maximise your return?

How many Australians work from home?

Working remotely has become more common as companies began providing the technology to enable employees to work from anywhere. Research from Roy Morgan found that in early2020, at the height of the COVID19 pandemic shut down, 32 per cent of Australian workers were working from home. This equates to over .3 million people.

It’s easier for employees in certain industries to work from home, such as finance and insurance, public administration and defence, and communications. In contrast, more “handson” industries such as retail, manufacturing, transport and storage and agriculture still require staff to be present instore.

Tax deductions available if you work from home

Home office expenses you may be able to claim include:

• electricity;
• cleaning costs for your dedicated work area;
• phone and internet expenses;
• computer consumables – such as printer paper and ink cartridges;
• stationery;
• and home office equipment – including computers, printers, phones, furniture, and furnishings.

The Australian Taxation Office (ATO) provides a complete list of the available deductions and how to calculate each on its website.

How to calculate your home office expenses

There are three methods employees can use to calculate their home office expenses:

1. Shortcut method: 80 cents per work hour – only available from 1 March 2020 to 30 June 2021
2. Fixed-rate method: 52 cents per work hour
3. Actual cost method

Be careful with home office expenses.

If you include home office expenses in your next tax return, ensure you calculate and apply your deductions correctly. For example, you can claim the full cost of home office equipment up to $300, but you need to claim the decline in value (depreciation) for any items that cost over $300.

Regardless of the method you use to calculate your expenses, you will need to have records. You’ll need to keep receipts for any purchases you’ve made and a record of relevant utilities and bills.

You’ll also need to keep a timesheet, roster or diary that shows the hours you’ve worked from home.

If you can, keep your relevant records and receipts aside and updated throughout the year to save yourself a significant administrative workload at tax time.

Have a professional prepare your tax return to maximise your refund

With the range of deductions that may be available to you, plus the different calculation methods for home office expenses, having a registered tax professional prepare your tax return can be worth the investment. Quite often, your maximised refund will more than cover the cost of having a professional prepare your return.

If you’re unsure about the home office deductions you’re entitled to, contact an accountant or qualified financial professional for advice.

The main reason people become self-employed is very simple: to have more control. For others, wealth creation is paramount, although small businesses are also more likely to fail and lose. Is it worth the hard work and the added risk?

If you are or dream of becoming a small business owner, here are some considerations and how it might apply to you.

Earn Less Now To Build Future Wealth

Every small business owner knows there are no 37.5 hours per week! The boss usually works longer hours than fellow salaried employees of the same age. Despite these long hours and responsibilities, small business owners generally have lower incomes.

Although they earn less, small business owners have a net worth based on the value of their business and, on average, have a higher net worth than workers of similar age and gender. However, their super balances are generally much lower than their salaried counterparts. The reason for this is simple: Many small business owners prefer to use surplus funds to grow their business if they have the option, in the expectation that the eventual sale will finance their retirement.

Protecting Your Investment

It is common for small business owners to use their home as collateral for business loans. This is a requirement of many lenders who want to ensure that the owner has a vested interest in the success of the business. For this reason, associated risk management is imperative. Life insurance can be used to protect income, home, and other personal assets in the event that the business owner dies or is unable to work to meet loan commitments.

Another area that small business owners often overlook is the need for key person insurance and overhead insurance. These policies are designed to protect the business and not the owner’s personal position. If the company can continue to fulfill its obligations, the corresponding personal risk for the owner is reduced.

When It’s Time To Sell

With less than one in three entrepreneurs having a succession plan, most of these entrepreneurs don’t plan their future well and with nearly 1. million small Australian businesses without employees, the owner is the company. This limits the company’s value as a salable asset, which means that when the time comes, many owners will have a hard time extracting the value of the capital they have built up in the company.

For owners selling their business, the proper use of capital gains tax (CGT) benefits for small businesses, for example, can significantly reduce the potential tax burden.

Don’t Go It Alone

A key trait of a small business owner is his ability to trust himself, but there is time for specialist advice. Financial advisors have the knowledge and skills to help in matters such as business structuring, personal property ownership strategies, and adequate insurance coverage.