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Everything That You Need to Know About Audit Quality

While audit quality may not be your top priority, you may want to reassess and reallocate resources towards your business’ ability to improve and maintain audit quality. Now, we understand if you’re a little hesitant to do this as you may not know much about what audit quality is. This is why we thought it would be useful to put together a brief discussion on this topic. If this is something that you want to learn more about, read on as we go through everything you need to know about audit quality.

What Is Audit Quality?

Audit quality encompasses the key characteristics that create an environment where audit data is likely to be accurate and reliable. Audits are considered to be high quality when the following conditions are met:

  • Exhibited appropriate values, ethics, and attitudes.
  • Applied a thorough audit process that complied with regulations and standards.
  • Provided accurate and timely reports.
  • Interact appropriately with any and all relevant stakeholders.

Financial statements must be reviewed in a consistent and thorough manner by qualified auditors, but that process is only effective when the auditors have support from the company’s management and all other relevant parties.

Why Is Audit Quality Important?

Financial reports provide investors with the information they need to make confident business decisions. The goal of an audit is to ensure that these reports are credible and accurate. Improving the quality of audits and ensuring consistency in audit procedures is key to maintaining investors’ confidence in the audits’ conclusions.

If a company fails but its financial report did not properly account for its lack of viability and issues that lead to its collapse, its directors and the auditor will be brought into question. In the case that investment decisions are based on financial reports that do not reflect the true financial position and performance of a company, this is a clear red flag.

How Do You Improve Audit Quality?

Given how important audit quality is, you may be wondering how to improve your business’ overall audit quality. Here are a couple of things that you can do:

  • Conduct effective quality reviews of your audits regularly.
  • Identify root causes of findings and develop action plans to address these findings.
  • Review staff structure to ensure that they are well equipped to handle complex audits.

While this may seem like it requires a lot of time, manpower, and resources, improving the quality of your audits will prove to be beneficial for your business. Think of this as an investment that will help your business. 

Conclusion

We hope this article proves to be useful when it comes to furthering your understanding of audit quality. While new concepts may be rather intimidating, this article should be enough to help you get started. Be sure to keep the information that we’ve discussed in mind so you can make the best possible decisions for your business. With that being said, take note that we’ve merely covered the basics in this article. For more information on audit quality, we suggest reaching out to a professional.

If you’re looking for an accountant in Caloundra to help you with your business’s finances, SMB Accounting is here to help. We offer various accounting services, such as individual tax returns, small business accounting, SMSF audits, trust account audits, special financial statements, and more. Learn more about how our accountants can help your business today!

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How to Claim Super Contributions on Tax Returns

Most Australians know that superannuation is money you save for retirement. But not everyone knows that you can also contribute your savings to super. Not only that, but the money you contribute (after taxes) can be tax-deductible.

If you did not know you can claim personal super contributions back on your tax return, we’ve got you. Here’s how exactly you can do that:

What Is a Personal Super Contribution?

A personal super contribution is money you contribute to your super fund outside of your super fund’s compulsory payments. And if you make personal super contributions, you can claim them back on your tax return.

Once you reach the age of 18, you can make personal super contributions. You’re eligible to claim a tax deduction for these contributions if your income is under €180,000.

How to Claim Personal Super Contributions on Your Tax Return

If you make personal super contributions to your superannuation fund, you can claim a tax deduction for these contributions.

The deductions for personal super contributions are listed in the tax deduction tables. When you add up all the tax deductions, it is up to you if you want to carry it forward to your next year’s tax return or claim it in any one year.

You should also note that you can only claim deductions for your personal contributions if your total income is less than €180,000.

How to Claim Tax Deductions for Personal Super Contributions

The first thing you will need to do to claim your personal super contributions is to add up all the deductions. In your tax deduction tables, the allowable tax deductions for personal super contributions are listed in section 3.

To work out your deduction, you need to work out the total income you earned during the year and then subtract any other allowable deductions you might have, such as medical expenses or rental property deductions.

Then you can use the total amount as the amount you can claim on your tax return. It’s that simple. Make sure you keep your tax return document as evidence for your claim.

What if You Make Super Contributions for Someone Else?

Making super contributions for someone else can also be tax-deductible.

The employer superannuation guarantee makes it compulsory for your employer to pay 9.5 percent of your salary to your super fund. But if your employer does not pay this money and you make personal super contributions instead, you can claim a tax deduction for these contributions. Your tax deduction tables list personal super contributions for other people in section 1b.

What Else Should You Know about Personal Super Contributions?

There are some other things to note about personal super contributions.

Your personal super contributions can be made through salary sacrifice. This means that you can choose to have part of your salary paid to your super fund instead of receiving it and receive a tax deduction for that.

Your personal super contributions can also be made before tax has been deducted. This is in the form of a before-tax declaration form.

Conclusion

As you can see, claiming personal super contributions on your tax return is simple. It’s just a matter of working out the total amount of deductions you have and deducting them from your total income.

And suppose you find that your combined personal and super contributions exceed the concessional contributions cap. In that case, it is still a good idea to claim the total amount, as you can carry forward unused contributions to your next year or carry forward unused deductions to your next year.

SMB Accounting does Individual tax returns, small business accounting with various small business accounting packages available, SMSF audits (self-managed super funds) as well as a Xero accounting software-based accounting business. We are your trusted partner when it comes to tax returns and superannuation. If you want to know more about the advantages of self-managed super funds, get in touch with us today! Let us know how we can help.

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DIN—What It Is, Why You Need It, and How to Obtain It

As part of the 2020 Budget Digital Business Plan, the Australian government wants to implement the Modernising Business Registers program. In this program, the ABRS (Australian Business Registry Services) was to be established to help businesses register and manage the information they share with the government. This is to be rolled out between 2021 to 2024, and the first change is that directors need to get a DIN (Director Identification Number).

Today, we want to shed light on the DIN to help you understand what it is, why you need it, and how to obtain it:

What is a DIN?

The DIN is a unique identification number for a director in the business industry. This number will make it easy for the government and businesses to identify a director by name. The identification number is mandatory for the directors of certain businesses and companies, the Australian Taxation Office (ATO), and the Australian Securities and Investments Commission (ASIC).

Why Do We Need a DIN?

As part of the Modernising Business Registers program, the DIN is being introduced as a way to help the government identify directors. This will help them track directors of Australian companies and enable the officers to gather information about the director.

If a director doesn’t have a DIN, they won’t be able to open one. This is because the government will be using the DIN when they verify the identity of directors using an online portal that they will use to register businesses.

How to Get a DIN?

If you want to register a business, you must get a DIN. Here is how to do it:

Step #1 – Determine if you need a DIN

As mentioned earlier, the DIN is mandatory for the directors of certain businesses, including companies, the ATO and the ASIC. This means that if you are running a business that requires a DIN, you need to get one. The DINs can be obtained using an online portal. To register for a DIN, you need a MyGov account. You can set one up as soon as you know you need a DIN.

If you are the director of a public company, you will have to apply for a PBN (person business number) instead of a DIN.

Step #2 – Register for a DIN

To register for a DIN, you need to visit the Government Gateway. This is an online portal that will allow you to complete the registration process. To start, you will need the following:

Go to this link Director ID Regsitration

Personal details, including your name and date of birth

Your business registration details, including business name and ABN (Australian Business Number)

Your email address

The bank account details where you want to receive the DIN

Biometrics such as a numeric device and a photograph

Step #3 – Receive your DIN

After you enter the required information and successfully register for a DIN, you will receive an email from the government. The email that you will receive will be from myGov and not the Department of Home Affairs, which also handles business registrations. This is why you should always check the source of the email and the link. The link in the email will take you to the Government Gateway, where you will be asked to verify your identity.

After you have verified your identity, you will receive the DIN in your bank account. The government will deposit the DIN in your bank account without any deductions.

Conclusion

In an effort to help the government identify directors, the Australian government has decided to roll out the DIN. The introduction of this identification number is part of the 2020 Budget Digital Business Plan. If you are running a business and is the appointed director, you should consider obtaining a DIN. It is compulsory, so get yours as soon as possible to avoid any trouble!

SMB Accounting offers individual tax returns, small business accounting, and various other services to help companies stay on top of their finances and obligations. If you are looking for accountants in the Sunshine Coast to help you with obtaining a DIN, work with us today!

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Essential Information You Need to Know About Your TFN

A Tax File Number (TFN) is a government-issued number that serves as your unique identifier. This account is associated with your tax returns, benefit payments and superannuation funds. Scammers may perpetrate identity theft and fraud in your name if it is in the hands of the wrong people. It’s preferable if you keep it in a safe place.

To protect yourself, you should never share your TFN with anybody else. As we’ll explain below, in only a few specific cases, is there a need to reveal your TFN.

The Use of a Tax File Number

You need a Taxpayer Identification Number (TFN) as soon as you start working at any employment. Your employer can tax you at a higher rate if you have not provided them with the information they need. Before you start your new work, it’s a good idea to register for one so that you can offer your new employer your TFN on your first day. The Tax File Number Declaration form is used to notify your employer of your TFN. It asks questions about your residence status and other tax-related topics.

If you don’t mark the “Yes” box (to “Do you want to claim the tax-free threshold from the payer?”), you will wind up paying more taxes than you should since you’re entitled to a tax-free sum of $18,200 per year. Remember that you only need to claim this amount from one employer in a given year. If you claim it from many companies, you may end up with a tax bill since you may not have paid enough tax for the year.

There are a few additional circumstances in which you may need to provide your tax file number, such as claiming Family Tax Benefit and other Centrelink benefits. If you need to establish a new bank account or apply for an Australian Business Number, you will also require your TFN.

Application for a Tax File Number

You may apply for a Tax File Number on the myGov website or in person at a post office. Alternatively, you may ask your tax advisor to apply for a TFN for you.

If you apply on your own, there is no fee. You must provide a secure and proper postal address to ensure that the package is sent to you after completing the application.

They will send your tax file number to you within ten days of your application, but it may take around 28 days for the ATO to inform you of your application and for you to receive it.

Ways to Find Your TFN

People lose track of the original letter they received over time. Use your Superannuation statement to locate them. Check with your bank, contact your employer, or check your payslips to see your TFN. Finally, you may contact the ATO or look at the Notice of Assessment from the ATO to get that information.

Lost or Stolen Tax File Number 

Contact the ATO immediately if you suspect that your tax file number (TFN) has been stolen or disclosed to someone else. Don’t be a slacker, and don’t simply put things off because it might lead to financial ruin.

To request that you give your TFN through email is never an acceptable practice from a tax professional. They shouldn’t ask you to fax it to them or put down your number somewhere, either. It puts your privacy in danger.

Once your email or the other person’s has been compromised, your TFN can be used to defraud you.

Conclusion

A Tax File Number (TFN) is a one-of-a-kind identification number provided by the Australian government. All your tax-related details and benefit payments are connected to your TFN. Keep in mind its importance and safeguard it properly.  

If you need tax consultants or accountants to assist you in organising and completing your tax statements on time, work with SMB Accounting. We provide a comprehensive range of high-quality accounting services, so you won’t have to worry about the time-consuming process. Hurry and get in touch with us now!

 

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Record Keeping Tips for Better Tax Refunds and Deductions

Tax deductions are very helpful resources at the end of the taxable year. To get the correct amount for claiming, it’s important to keep an accurate record of your books. Good record-keeping is important anyway to make sure you are abiding by the proper regulations.

If you don’t properly calculate your deductions, you essentially lose money. Statistics even show that Australians miss out on millions of unclaimed tax deductions every year. Throughout the audit process, you’ll rely heavily on the records you’ve kept to get what you’re entitled to.

Read on for some tips to better record-keeping in preparation for tax time.

Keep Your Receipts Throughout the Year

You should make it a habit to store your receipts safely throughout the year. This will give you the proper references for your claims, especially if the Australian Taxation Office (ATO) brings any of your claims into question. This will help prevent you from paying any more tax than you have to.

A good way to organise this is in chronological order. This way, you can easily get a reference of your receipts from the date and time of the transaction. It also ensures that you can keep track of your expenses as you go along. You can also segregate your receipts under categories depending on the type of expense. 

Make sure you also keep a digital backup of your receipts for safety. In case of loss or damage, you can always refer to your digital files.

Record All of The Income You Receive During the Year

You also need to keep track of all the income you receive. This includes any salary or wages from your regular job. Beyond that, you also need to take note of investments, managed funds, allowances, dividends, and earnings from any rental properties or room letting. 

If you have a full-time job, your employer will be responsible for providing you with an annual statement with all of your yearly earnings. If you have a managed fund or real estate property, you should make sure you get that same summarised statement from your agent or fund. 

You should also note that any asset you acquire or dispose of should have a record with you. It is recommended by the ATO to keep these documents for five years from the day you are no longer required to produce any capital gains tax (CGT). 

Record All Your Tax Deductible Expenses

Finally, you need to make sure you have proof of any and all tax-deductible expenses. This comes down to receipt keeping again. If you’re not sure what applies, the following categories are considered eligible for a tax refund:

  • General expenses, including charity donations, private health cover, income protection costs, tax agent fees.
  • Work-related expenses such as license and certification fees, union fees, professional memberships, and gifts.
  • Expenses on education, like course fees, textbooks, travel costs, food and accommodation during school trips or lessons, and library fees.
  • Work-related purchases and travel expenses. This includes any equipment for your office, like furniture, organisers, computers, software, technical tools related to your field, and any electronics. Any purchase worth more than three hundred dollars will require a claim with their decline in value incorporated. For travel, this includes tolls, vehicle costs, parking, public transportation fares, flight expenses, and food and accommodations for work trips. Those that work from home can also make claims for internet, postage, and electricity on top of the previously mentioned items.
  • Newly acquired asset costs and expenses for rental properties and investments.
  • Recently disposed of or sold assets.
  • Expenses on protective clothing and uniforms.
  • Any expenses for disability and aged care.

Conclusion

If you can stay on top of the items mentioned above, you’ll have a much easier tax season. Calculating your income tax returns and deductibles can do wonders for your financial health in the long run. A good accountant should be able to help you get through these documents easily and calculate them properly. 

To prepare for the next tax season and make sure you have the right audit process, reach out to SMB Accounting. We provide individual tax returns and small business accounting. Contact us and we’ll connect you with an accountant from the Sunshine Coast ready to accomplish your accounting needs.

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3 Tips To Help You Save More Money During Tax Season

Taxes are nothing to be excited about, and for many people, it is nothing but a hassle. Plus, it is an activity where individuals lose money, so it isn’t something people look forward to. However, what is to be excited about is the many ways one can reduce the taxes one has to pay overall. In other words, there are many tactics to save money on taxes, and it all starts even before tax time arrives!

Today, we’re going to share various tips on how you can prepare yourself for tax time to maximise savings:

1. Don’t Forget To Donate

Every donation that’s over $2 is tax-deductible. As such, it is a great idea to give back to the community, and donating itself is a sensible way to spend your money. After all, not only do you better the organisation or group you contributed to, but you also build your reputation as a company that cares. 

That said, remember that when you do get your refund, know that you won’t see your donations come back immediately. It’ll come back slowly as a percentage, and the amount will come off your taxable income.

2. Claim Anything Job-related

Most of the things you purchase that are job-related can be claimed. For instance, an office chair, an office table, a new printer, and the like that are all used for work can be claimed. Even things that are partially used for personal and commercial use as a vehicle can also be claimed, but you just need to make sure that you properly calculate the amount to be deducted.

If you are unsure whether an item you purchase can be claimed, hold on to the receipt. You can reach out to an accountant to help you understand whether it is claimable.

3. Get Your Expenses in Before June

June is when tax time starts, and for any expenses that come after June, you’re going to have to wait a full year before you can claim on them. As such, if at all possible, get all the expenses in before June. 

Remember, the only way you’re going to get your expenses in before June is if you’ve put in the hard work of ensuring they do in the first place. If you find yourself falling behind or becoming a little too relaxed with your record-keeping and the like, then it is time to remind yourself to step up.

Conclusion

Tax is never easy, and many people easily get lost trying to stay on top of their taxes, let alone trying to claim from it. If you are facing the same issue, chances are you might run into tax issues that lead you to costly consequences and limit how much savings you can make. Following the tips above can help, but consider hiring an accountant if you still find yourself lost amidst tax seasons! Their expertise can help you stay on top of your taxes all year round, and when the time comes for tax time, they can ensure that you meet all your tax obligations and make the most out of your savings!

SMB Accounting offers various small business accounting packages and other services such as audits and tax returns to help small companies maintain their financial well-being. If you are looking for accountants at Sunshine Coast to help you with tax returns, work with us today!

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4 Important Tax Deductions That You Have to Know About

While we often take it for granted, taxes are incredibly important. This is why you’ll want to invest an ample amount of time to make sure that you get everything right. Failing to be thorough when it comes to taxes will surely lead to you losing a significant chunk of money.

When it comes to doing taxes, one of the most important things that you’ll want to focus on is deductions. Through deductions, you’ll be able to minimize the amount that you have to pay in taxes. The tricky thing about this is that people tend to either forget or are completely unaware of the deductions that they are eligible for. This is why we thought it would be useful to put together a brief refresher on this subject. If this is something that you’re interested in knowing more about, read on for a list of four important tax deductions that you have to know about!

Tax Agent Fees

Many of you may not know this but the fees that you pay to a tax agent or a tax consultant are actually tax-deductible. This means that if you made use of their services while preparing and lodging your tax returns last year, then you are able to cite it as a deductible. And while this won’t completely offset the costs of the services, this is another incentive to make use of professional services when filing for your taxes.

Union Fees

If you’re part of a union, you’ll be glad to know that your union fees are tax-deductible as well. To add to this, members of groups that are related to your profession that charge a fee for membership are also granted a tax deduction on the fees that they have to pay.

Work-Related Car Expenses

For those of you who have to drive around in your personal vehicle in order to perform your duties at work, we’d like to remind you that all car-related expenses can be a tax deduction. This includes but is not limited to fuel, maintenance repair fees, and other costs attached to using and maintaining a car. Now, there are two methods for calculating this deduction. You can either keep a 12-week logbook or you can make use of the cents per kilometre method. The cents per kilometre method derives the deduction from the total kilometres travelled in your car while you are doing work that generates income.

Home Office Expenses

Lastly, it’s important to note that your home office expenses are also tax-deductible. And while this may not be relevant to some of you, people who spend a considerable amount of time working from home will surely benefit from this. You can claim the cost of using your personal computer for work as well as any equipment or tools that you need for your job. If you work to spend all of your work hours at home, you can also claim the occupancy cost of your home office space as a tax deduction.

Conclusion

We hope this article proves to be useful when it comes to helping you with your taxes. While this may seem like a lot to take in, be sure to keep all of this information in mind as it will surely make a difference when it comes to doing your taxes. Feel free to refer back to this article whenever you have any questions about tax deductions.

SMB Accounting has knowledgeable tax consultants who can help you get started with taking care of your tax refunds. We make sure that our clients use their tax refunds wisely, and we also offer other services such as accounting and business advice. Contact us today for a consultation!

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Audited Financial Reports: When Does Your Company Need It?

All business owners can agree that their company’s finances are one of the most important operations that help keep their business running. With that being said, dealing with finances can be incredibly challenging but still necessary to ensure you provide an accurate record of your financial health—that’s where an audited financial report comes in. 

An audit is used to obtain an independent opinion on the financial report of a company or organisation. This information will boost the credibility of the information provided and improve confidence for intended users of the financial reports. Besides that, an audit will have to be presented per accepted accounting principles, and because of this, working with an experienced accountant is a must. 

In addition to boosting your credibility and user confidence, audits also promote consistency and objectivity in financial reports, presenting your company as true and fair. To that end, when are audits required?

When are Audited Financial Reports Required?

When You Have a Charity or Non-Profit Organisation…

For charities and non-profit organisations with revenue under the review or audit thresholds don’t need to submit the Annual Information Statement. Note that you’re not required to provide financial statements to the ACNC. However, it is highly recommended that you consider your constitutional requirements, which may require reporting obligations to members. 

When You Have a Large Company…

When your company evolves to a large proprietorship, your business must be audited under the Corporations Act. To know if your company falls under a large proprietary company is if, at the end of the financial year, your company meets the following criteria:

  • You have a consolidated revenue of &50 million or more;
  • You have consolidated gross assets of $25 million or more;
  • You have 100 or more employees;

When You Have a Small Company…

Usually, small proprietary companies aren’t required to prepare a financial report. However, if the ASIC or shareholders require a report, then you must comply. But seeing as this is a case-by-case basis, you must work with a credibly accountant to ensure that your finances are on track and if you’ll be requiring a financial audit. 

Why Do You Need a Financial Audit?

  • Companies, organisations, or charities seeking to obtain a grant, investment, or external funding may have to undertake an audit. This is because this may be part of qualifying criteria that will satisfy the provisions of the grant;

  • Some lenders may ask companies to provide audited financial reports if your business would qualify for a loan or satisfy loan requirements.

  • In some cases, businesses would like to change ownership or sell their company; because of this, a buyer may require a financial report to see the true value of your business.

  • Some companies and organisations may need an audit specified for the constitution, rules or other documents. Because of this, you’ll need to work with a credible accountant and auditor to create a financial report. 

The Bottom Line: Audited Financial Reports are a Crucial Part of Any Organisation or Company

Seeing as audited financial reports are a huge requirement for some organisations, to stay compliant, you must work with a trusted accountant and auditor to ensure that your financial reports stay accurate. Otherwise, you may be dealing with a plethora of financial-related issues that may impact your company. 

How Can We Help You?

There’s no denying that financial audits or reports can be incredibly overwhelming for some businesses. Thankfully, SMB Accounting has a team of highly skilled accountants who are equipped for this job.

Our accounting firm offers various financial services like individual tax returns, accounting for small businesses, self-managed super fund audits and more. If you’re looking for a reliable accountant in Caloundra to help you run your business, reach out to us today!

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Taxing Wisely: 5 Tips to Use Your Tax Refund

Paying taxes is an activity that any law-abiding citizen must do. By paying taxes, there are times when you get a tax refund. As the name suggests, a tax refund is an excess of taxes that are given back to the taxpayer.

Most people would agree that a tax refund is a lifesaver. This is because an annual tax refund gives you many options on what to do with it, such as paying back debts or simply saving them for future use. In other words, a tax refund has a significant effect on your finances.

How exactly do you use your tax refunds wisely? This article lists down some ways that you can do this. Read on below to learn more.

#1 – Super Contribution Top-up

According to the Australian Securities and Investments Commission (ASIC), the average single person who retires at 65 with a “modest” lifestyle will need approximately $300,000 today to retire. On the other hand, those who want a “comfortable” lifestyle in retirement will need roughly $544,000.

For most people, those are massive numbers. If you add to your super very early on, it gives your savings a lot of time to grow. Simply get in touch with a superannuation advisor, and they will tell you how to transfer your tax refund into your super fund. It may seem like a small thing now, but your future self will thank you once you retire.

#2 – Term Deposit for Your Children

If you have children, your tax refunds can be used for their benefit. Tax refunds are like a long-term investment that you can use for your children’s big-ticket expenses, such as their education or their first car.

While not everyone has term deposits on their plans, it pays to set aside some funds for your children—especially considering the rising living costs in the country.

#3 – Buy Work-Related Equipment

Buying work-related equipment such as computers is no easy task. If you don’t have enough money, chances are you’ll be stuck with a subpar piece of equipment that hinders your job performance.

Work-related items that cost more than $300 must be depreciated over the “life” of the item. If you buy them by the end of a financial year, then the benefits on your subsequent tax will be small.

On the other hand, your depreciation calculation will cover more time if you buy them between July to August. In other words, it’s a bigger deduction on your next tax return.

#4 – Pay Off Debts or Loans

If you have credit card debts or personal loans that you’re paying off for a long time, then it’s recommended that you use your tax refunds to pay for them.

It’s a good idea to do so because your interest repayments will go down as soon as you lower your outstanding balance. Aside from that, you can now use the money for yourself instead of it going to your lender.

#5 – Put It in a Mortgage Offset Account

If you have a mortgage, chances are your mortgage provider is offering a mortgage offset option. A mortgage offset account is like a savings account, but it works a little differently. Your offset balance is deducted from your outstanding mortgage loan balance to calculate the interest component of your mortgage payments.

Because of this, you end up paying less interest for your mortgage, which leaves you with more money. You can pay off your mortgage quicker while your offset account balance is ready to be used in case of an emergency.

Conclusion

Tax refunds are money that comes back to you, so you must use them wisely. You can use them to pay debts or save them for later if a financial emergency occurs, as well as keep them as deposits for your children. In the end, you’ll be glad you have done so, because you will be able to get out of a bad spot quicker.

SMB Accounting has knowledgeable tax consultants who can help you get started with taking care of your tax refunds. We make sure that our clients use their tax refunds wisely, and we also offer other services such as accounting and business advice. Contact us today for a consultation!

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Your Guide to Claiming Home Office Expenses in 2021

Even if the room is not set aside purely for work-related purposes, you may be able to claim a tax deduction for the costs of running your home office, provided you did some of your work from it in the previous financial year. These critical tax deductions typically cover the expenditures of working from home or running a home-based business.

The question is, how can you claim your home office expenses this year? This essay will serve as a roadmap for you.

What are the new arrangements?

Due to COVID-19, the Australian Taxation Office (ATO) made specific provisions last year to make it easier for persons to claim deductions for working from home.

Rather than calculating expenditures for specific running expenses, the new ‘shortcut technique’ allows people to claim a rate of 80 cents per work hour for all their running costs.

This rate is available to multiple people living in the same residence. For instance, a couple living together might each claim the 80 cents per hour rate.

Which strategy should you use when claiming?

You have three options for calculating your home office expenses:

Shortcut Method

Claim a rate of 80 cents per work hour for all additional running expenditures.

Fixed-Rate Method

Calculate the work-related portion of your phone and internet expenses, computer consumables, stationery, and the decline in value of a computer, laptop, or similar device at a rate of 52 cents per work hour.

Actual Cost Method

Claim the portion of all your operating expenses directly relevant to your job, which you must calculate on a fair basis.

Whatever approach you use, please follow the following rules:

  • The money has to have been spent by the taxpayers and not repaid.
  • The claim must be directly tied to income generation.
  • There must be documentation to back up the claim.

What are the expenses you can deduct?

You can claim the following expenditures if you are claiming using the fixed-rate method or the actual cost approach.

Running Expenses

Home office operating expenditures, such as energy, gas, and office furniture depreciation, can be deducted (e.g., desk, tables, chairs, cabinets, shelves, professional library).

You should keep diary/logbook documentation for four weeks to prove a pattern of working from home and justify the number of hours you are claiming, exactly like with a motor vehicle claim.

When no additional costs are spent, such as when you work in a room where others are watching TV or when the income-producing use of the residence is incidental, no deduction is allowed.

You’ll need receipts for the following expenses:

  • Work-related equipment in the home office.
  • Repairs to the home office, as well as furniture and equipment utilised for business reasons.
  • Cleaning costs for the home office.
  • Any extra costs associated with maintaining a home office on a day-to-day basis.
  • Keep a journal entry for each of your minor expenses ($10 or less) that total no more than $200.

Telephone (and mobile phone) and Internet Expenses

If you can recognise work or business calls from an itemised phone bill, you can claim the deduction for the billed percentage related to work or business.

For the whole year, a representative four-week period will indicate a pattern of internet and telephone use.

If you are “on-call” or compelled to contact your company or client frequently, your phone rental expenditures may be partially deductible.

Equipment Depreciation Expenses

You can claim depreciation on home office equipment such as computers, printers, photocopiers, scanners, and modems, but it must be allocated to the equipment’s use for work or company purposes. You can claim depreciation on office equipment and furnishings if you use the actual cost approach.

Occupancy Expenses

Only if the residence is used as a place of business is a claim for occupation expenditures allowed. The claim must be filed as an apportionment of total expenses incurred on a floor area basis.

  • Rent
  • Interest on a mortgage
  • The cost of water
  • Repairs
  • Premiums for homeowners’ insurance.

If you sell your home in the future, being able to claim these expenses may influence your principal residence exemption for capital gains tax reasons.

When does a house become a business?

The following indicators, none of which are conclusive on their own, may help to determine if a designated area contains the characteristics of a business:

  • The area is marked as a business district.
  • The area is not readily adaptable or suited for private or domestic use in the home context in general.
  • The region is used solely or virtually exclusively to conduct business.
  • Client or customer visits are typical in this area.

You are not entitled to a deduction for occupation expenses if you use your house to carry out income-producing activities as a matter of convenience. It would be unusual for a worker to be able to claim travel expenses.

Working with a tax professional can help you avoid common mistakes while filing your tax return and maximising the amount of money you get back. Please contact your trusted accountant on the Sunshine Coast from SMB Accounting for assistance with your tax return!

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