While Australians may disagree on how the government spends their taxes, at tax time, many of us are looking for ways to pay no more than we owe or even boost our tax refunds. These strategies go beyond the obvious to give you tried-and-true ways to reduce your tax liability.
Increase your tax refund
It’s annoying when you realise you can’t claim back the hard earned cash you spent on work-related equipment and essentials because you don’t have a tax receipt. When you’re in the habit of snapping your tax receipts, it’s easy to quickly add them to your 2023 tax return folder.
Do you work from a home office or do you need to do overtime from home?
If taking work home is a regular occurrence for you, it’s a good idea to set up a dedicated area to work in. It can help you stay focused and there is also another bonus that you can claim tax deductions for your home office expenses. These expensive tax deductions generally cover the costs associated with working from home or running a business from home.
Home office expenses can be split into two broad types:
- Home office running expenses and
- Home office occupancy expenses
1. Home Office Running Expenses
Home office running expenses are claimed when you sometimes work from home. But if you permanently work from home you can use the occupancy expenses method.
These are general home office running expenses and include:
- The cost of using a room may be power costs for heating, cooling and lighting.
- Business related phone call costs
- The decline in the value of IT equipment like computers, printers, scanners etc.
- The decline in value of furniture and furnishings like tables, chairs, curtains/blinds, floor coverings, light fittings etc.
- Repairing cost of furniture and furnishing used for your work
- Cleaning costs
Not included work from home expenses:
- Mobile phone
- Home Internet
- Home phone
- Personal Computer depreciation
You can claim running expenses in two ways:
- At a rate of 52 cents per hour which known as the fixed rate method or
- The amount of actual expense you incurred through an established pattern of use which is known as the actual cost method.
52 cents per hour – Fixed Rate Method
Use this rate to work out what you can claim as running expenses on your tax return. It is a nominal rate set by the ATO to cover all home office expenses, rather than claiming them individually.
For example if you work for 8 hours at home, you would calculate your claim by multiplying 52c by the number of weeks worked per year.
Pattern of use – Actual Cost Method
If you want to claim the actual costs incurred from working at home you need to keep a record which shows your pattern of use. The ATO accepts a diary that notes the day and time that you used your home office for work. Your diary should be kept for at least four weeks in a financial year. You can then apportion all of your associated expenses to claim a portion of your power, heating, cooling, cleaning, furniture etc. This method generally leads to a bigger claim than the cents per hour method but is more complicated. Contact our tax agent to see which method is best for you.
2. Occupancy expenses
Occupancy expenses are relevant only to those using their home as a place of business. If your employer does not provide you with a workspace and you can provide evidence that your home is your primary place of work, you can claim occupancy expenses as well.
Occupancy expenses includes:
- Mortgage interest
- House insurance
- Computer or Office Equipment