As we close the financial year 2022-2023, employees in Australia who work from home may still be able to claim tax deductions related to their home office expenses. While the pandemic may no longer be the primary reason for working from home, many employees continue to work remotely for various reasons, such as a preference for a more flexible work schedule or to avoid commuting.
If you are an employee who works from home, there are several tax tips that you should consider to help minimise your tax liabilities. One of the most important is to ensure that you meet the criteria set out by the Australian Taxation Office (ATO) for claiming home office expenses as deductions. These criteria include:
- You are required to work from home by your employer or as part of your employment contract.
- The expenses you incur are directly related to earning your income and are not of a private nature.
- Your employer has not reimbursed you for these expenses.
Assuming you meet these criteria, you can claim deductions for expenses such as electricity, internet, phone bills, and office equipment. However, it’s important to note that you can only claim a portion of these expenses that relate to your work.
Two Methods for Calculating Home Office Expenses: Which One is Right for You?
When it comes to calculating your home office expenses, you have two options available to you from 1 July 2022. The first option is the revised fixed rate method, which allows you to claim an amount per work hour for additional running expenses, as well as a separate amount for expenses that are not covered by the revised fixed rate, such as the decline in value of depreciating assets. Under this method, you are not required to have a dedicated home office.
Alternatively, you can choose to use the actual cost method, which involves calculating the actual expenses you incur as a result of working from home. If you opt for this method, you must keep detailed records of all expenses incurred, including receipts and bills. The type of records you need to keep will depend on the method you choose to calculate your expenses.
Additional Tax Tips for Employees
Aside from claiming deductions related to home office expenses, there are other tax tips that you should consider. For example, if you incur work-related travel expenses such as meals, accommodation, and transport, you may be able to claim these as deductions. Similarly, if you undertake work-related education such as course fees, textbooks, and travel expenses, you may also be able to claim these as deductions if they have a direct connection to your work and improve your skills or knowledge in your current role.
You should also consider making additional superannuation contributions before the end of the financial year. These contributions can be tax-deductible and can reduce your taxable income. However, there are limits to how much you can contribute each year, so it’s important to seek advice from a financial advisor before making additional contributions.
Finally, it’s important to keep accurate records of all work-related expenses and deductions, including receipts, bills, and a record of all hours worked from home. Doing so can help ensure that you are able to claim all the deductions you are entitled to and avoid any issues with the ATO.
In conclusion, if you work from home as an employee in Australia, there are several tax tips that you should consider to help minimise your tax liabilities. By understanding the criteria for claiming home office expenses as deductions, using the shortcut or actual cost method to calculate these expenses, and taking advantage of other deductions such as work-related travel and education, you can help ensure that you are not paying more tax than necessary.
Contact our expert team at Equil Advisory to find out more.
