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Here is what the sole traders need to know about JobKeeper 2.0

Here is what the sole traders need to know about JobKeeper 2.0

It’s been a while since the introduction of the government scheme called JobKeeper to keep the working-class people of Australia employed. But recently some modifications were introduced in this scheme to make it more convenient and accessible for the people who need it the most. In any moment like this, the sole traders are in a state of panic as they don’t know where to find the most relevant and authentic information about this refreshed scheme. As the people are already aware of the strict rules of the department for tax return Melbourne, they need to be updated about the latest information to avoid any trouble. You don’t have to worry much about it as we bring to you the most relevant information about it in this blog.

These changes will come into effect from September 28, 2020, in order to make this scheme more suitable for the sole traders. Later sections of this blog will provide you all the essential information about the changes made if you are a sole trader.

The following updates have been made in JobKeeper 2.0:

  1. Who is eligible for JobKeeper 2.0?
  • You have to keep in mind that only those persons are referred as sole traders who run the business not those who are working in that businessman.
  • As of the regulations mentioned in the new scheme, from 28 September 2020, any business that has seen a drop in their turnover is eligible for this as well as all the future versions of this scheme.
  • In case, you meet all the criteria except for a few, then there is no need to worry. Because there is a way that enables the Commissioner to exercise his power of discretion. In that case, you may get some additional time to gather all the other documents for eligibility. You should appeal to the commissioner for this opportunity.
  • Only those businesses will be eligible for this scheme who meet the eligibility criteria described in the new scheme.
  • In case you have any difficulty in any of these processes, the department for online tax return Melbourne is always there to help you.
  1. What can one do if he/she is not available on the specified date for qualification due to sickness or injury?
  • If you have missed the specified date for qualification, there are some special arrangements for you. Go to the page of the Coronavirus Economic Response Package. On this page, you should read the Sole Trader or Small Partnership with Sickness, Injury or leave.
  1. How much money will I get from JobKeeper 2.0?
  • There are different tiers that have been made under this program. How much money you are going to get from this scheme depends on the tier for which you have qualified. As the situation has become so harsh for business owners that they doubt whether they will be able to gather enough money enough for individual tax return, they are constantly asking about the amount of money they are going to get from this scheme. For more information, you should go to the JobKeeper payments section on the official website of ATO.
  • Broadly speaking, if you are a sole trader and you have worked for less than 20 hours a week in the last four weeks before 1 March 2020, you will qualify for the lower tier of JobKeeper. And, in case you have worked for more than 20 hours a week before 1 March 2020, you now qualify for the higher tier of payment of the JobKeeper scheme.
  • Take a look at the payments plan for the higher and lower tier of JobKeeper:

Lower tier:

  • $650/fortnight from 4 January 2021 to 28 March 2021.
  • $750/fortnight from 28 September 2020 to 3 January 2021.
  • $1500/fortnight until 27 September 2020.

Higher tier:

  • $1000/fortnight from 4 January to 28 March 2021
  • $1200/fortnight from 28 September 2020 to 3 January 2021
  • $1500/fortnight from until 27 September 2020.
  • There are some discretions over the eligibility hours for this scheme. These discretions are valid for those who have either volunteered in the bushfires or they were unable to work because of the restrictions put due to COVID-19.
  1. What about the new employees arriving in your business:
  • No any employee is eligible for this scheme if he has joined your business after 1 July 2020.
  1. Guidelines about the Advance payment of JobKeeper amount:
  • There have been several appeals from the sole traders about the cash flow demands of this scheme. The government reimburses the money in arrears even in the new system.
  1. What can one do if he is seeing a decline in the turnover after March 1?
  • There may be some instances where someone’s business had started declining after March 1, 2020. So, in the new scheme, a way has been designed that enables them to enroll for JobKeeper 2.0.

The Australian government is trying its best to make the business owners capable of coping with this situation. They are introducing new schemes. Such a situation has challenged the people working under the governmental department. That is why the government is always looking for officers who are recruited after giving them the best tax training. That enables them to work under any situation.

Conclusion:

In any matter associated with economy and tax, Accounts NextGen is always there to provide you authentic information about the situation going.

Accounting profession latest JobKeeper 2.0 Regulations

The Government of Australia declared six-month extension to its Job Keeper Program whose expiry was scheduled on 27 September. JobKeeper 2.0 will experience diverse payment rates, and likewise, the eligibility requirements too would be different till March 2021.

Job keeper payments are also subjected to reduction from 28 September 2020 to 3 January 2021 with the revised norms having reduction of $1,200 per fortnight for people working for 20 hours or more in a week and $750 for job keeper working less than 20 hours. In order to be eligible, businesses need to substantiate that their GST Turnover has undergone a reduction in both the quarters of June and September 2020.

Also, the rates are again scheduled to decline to $1,000 and $650 for the folks having working hours figures below 20 hours a week with effect from 4 January to 28 March 2021.  Businesses are bound to undergo retest of their eligibility again along with showing off their declining turnover test for quarters of June, September, and December 2020.

The extension is welcomed, but the jobs of accountants have been increased with the frequent change in eligibility criteria. Due to revised GST turnover and eligibility criteria, business houses will now be more careful of their cash flow and billing provisions. During this hard time, treasury’s new fact sheet, which keeps the records of entities, came up with little assistance stating that eligibility will be assessed based on details stated in BAS (Business Activity Statement). It further stated that deadline to file a BAS is ordinarily due in following months and businesses and nonprofit organizations will be required to check their eligibility for JobKeeper before BAS deadline to fulfil the terms of the wages.

Tony Greco, the general manager of the Institute of Public Accountants, stated he hopes that the guidance on actual GST turnover will be mentioned clearly before its implementation. As per the existing norms, turnover is the value of supplies accomplished in the relevant duration comprising of GST-free supplies and excluding input-taxed supplies. Before the issue of LCR 2020/1, the ATO’s website stated many times in a week but actually couldn’t clear that cash and accrual methods were concessionary modes and it got cleared with the release of LCR only.

“The LCR states clearly that the law makes the taxpayer segregate supplies done in each relevant period, and after that, it is required to work upon the value of supplies.

Time to adjust

CPA Australia’s tax policy adviser, Elinor Kasapidis, appreciated the lead duration given to implement the incoming changes as the rate and eligibility changes are subjected to implement from September 2020. He further stated that it is incredibly welcoming to see that government has replied to their feedback and promised that the Jobkeeper’s profession has sufficient notice to comprehend the changes and suggest their business clients accordingly.

Advance notice would aid businesses to seek professional advice to craft the finest course of action and know the things they may be required to become eligible.

Ms Kasapidis also requested the government to lay attention over funding voucher scheme for small business houses to seek expert advice when they couldn’t afford it. Despite this announcement, many businesses still not lookout for advice and would play with their future and business.

To aid small businesses in seeking help, the government should give them vouchers that they can use for professional advice. The tax agents would turn out to be key to the success of JobKeeper.

Are you looking to Maximize your Tax Refund? But How?

Everything, you must be aware of about the ATO’s flat rate if you’re planning to use it for your tax return.

The end of the ‘financial year’ is on edge. Lots of challenging and unforgettable curves have already bumped into people’s lives, both financially and physically, and anticipating more tax refunds is a usual thing.

Shortcuts can provide you relief to some extent, but your entire efforts may turn out a big failure because already, a team of experts has been assigned with the work to collect the entire expenses, bills, and receipts on your name. So they don’t miss out even a little chunk of dollars to be mentioned in your tax return.

To battle with Coronavirus, the lockdown has forced people to turn their lounge room into an office area. Therefore, after mapping out the entire situation, the Australian tax office (ATO) has also introduced higher Flat rates.

Accordingly, ATO uses a simplified process that brings easiness for people to claim rates. For instance- people who are following “work from home” ATO come across the decision to lift the standard hourly rates from 52 cents to 80 cents per working hours.

Before opting for the flat rate and rather than working out on calculating expenses, with an alerting message, the tax experts outline various reasons why figuring out things and taking steps ‘carefully’ are essential.

Spokesperson Andrew Gardiner, from National Tax and Accountants’ Association, mentioned it the most important thing. Although, the concession (flat-rate) includes cooling, electricity bill, off heating, expenses incurred on office expenses like printer, computer, paper, and cartridge.

Certainly, it’s not a big claim; hence people must be sensible and careful as they’re only getting 80 cents per hour for standard 40 hours a week, which means only $32.

Choosing the flat rates will imply that the taxpayer is washing hands from claiming the amount on purchasing the new computer, chair, and desk while they were working from home.

Remember, you can’t think about opting ATO’s 80 cents per hour claim if you are choosing this option. Lately, you also have to forgo your right to the claim of office expenses. Like for electricity, internet, or telephone expenses, you can’t expect to claim separately. The right to claim for deprecation on a computer printer, paper, and cartridge will also be forfeited.

The Ways To Maximize Your Tax Refund

Travel

As mentioned by (Platinum Accounting & Platinum Professional Training’s CPA and managing director), Coco Hou, travel can be necessary for the following reasons:-

  • You may have to go out of your home to purchase some essential items; hence, you incur costs.
  • You incur a cost as you have to put petrol in a car while traveling.

The things you may leave unnoticed

Expenses that you incur while subscription for services or car insurance are some of the most notable costs you incur while working from your home, and that you must include.

Slip up on ‘what to claim?’

Global pandemic with giving rise to lots of problems has also introduced some confusing situations related to claim. What to claim, and what can’t be claimed? However, according to Ms. Hou, the answer is clear: every item that comes out of your employment work is un-claimable since they aren’t part of your regular working environment. Like toilet paper or food.

Final statement ‘what do I need?’

The ATO (Australian Tax Office) always asks people for a number of hours and a list of expenses they have incurred in the last four weeks while working from home- said Mr. Gardiner. Hence, you should always be ready with the documents that hold the record of your expenses.

Understanding Tax Deductions for Charitable Giving

If you also follow charitable giving, and amid this hard time, if you are also coming ahead to help people who are unable to deal with the current situation, you must understand Tax deductions. It’ll not just assist you in trimming down the excessive tax burden from your shoulder; indeed, it may encourage you to help needy people more.

Every year, around one-third of Australians give their significant contribution to Charities. If you are also one of them, you must pay attention to the following rules that are crucial to understanding for every person contributing to charitable giving.

Are you giving money to charity? Don’t forget your gift!

Do you want to give a significant boost to your tax refund? Then tax-deductible donations are the best way to make this possible. You can find plenty of charities around you who rely on donations as it supports them. Your little contribution can help lots of unfortunates.

But remember, if you want to connect with a charity or already you’re a part of any, then make sure the charity is registered by ‘ATO’ if you’re paying more than $2 as a donation to them. According to ATO, it must be “Deductible Recipient organisation” otherwise; you can’t expect any tax deduction.

Most of the charities are apparent in such phases. But if you want to pay double attention, you can also ask them for “deductible gift recipient status,” which will clear your doubts.

Donation That Isn’t A Tax Deduction

ATO marks the following scenarios before providing you with a tax deduction for charitable giving-

  1. If you donate to an organisation that isn’t registered, you can’t claim any tax deduction on your generous donation.
  2. If in the exchange of your donation you receive something from the charitable organisation, such as- a dinner attendance, chocolates, etc. then you aren’t eligible for a tax deduction.
  3. It’s often a significant confusion among people that donating to churches will shed tax burden. Still, it’s not the whole truth. Like a registered charitable organisation, the churches come under registered places for charity. However, leaving essential things unnoticed and requesting ATO for deduction may give rise to problems for you. Don’t claim it unless you’re entirely assured whether it’s eligible or ineligible.

It’s easy to track your Tax Deductible Donations to charities.

Most Australians, during tax time, fail to mention or present some crucial things that hold them back to claim any deduction. For example- people either forget their receipts or deductible donations while filing tax return in Melbourne.

You must be prepared to verify your claim. For this, you must always be ready with entire documents and a series of receipts. No matter; whether your donations were in cash or related to some goods or services, you should always keep a detailed record of your donation in order to become eligible for a refund. However, it would be much better if you’ve made payments with check or donations have been made in the following Tax Year.

So are you ready for your tax deduction?

How to handle your tax returns efficiently this year?

With the advent of the global pandemic, COVID-19’s impact, each country’s economy is going through loads of ups and downs. Each person is facing drawbacks of recession differently. Hence, this tax season, because of COVID-19, Australians are advised not to accept the increased Flat Rates.

Already, the Australian Tax Office (ATO) has simplified the claim process for mass forces due to lockdown. The step has been taken to encourage people to ‘work from home.’ Therefore, the standard hourly rate has been increased from 52 cents per hour to 80 cents per hour.

But Spokesperson Andrew Gardiner from the national Tax and Accountant’s association expresses it with a distinct viewpoint. According to him, it will be unfair with taxpayers who have already paid the tax.

Even though concession covers off electricity, cooling, heading, and incurred expenses on printers, cartridge, papers, and computers; but people still need to be very careful. For instance, the concession includes only 80 cents per hour, which is over a typical 40-hour-week if you factor it.

Similarly, it’s not a massive claim for sure. Hence, you must be acquainted, that by simplifying the affairs, you aren’t going to get more significant claims.

However, choosing the flat rate by the taxpayer will result in losing the right to claim for new computers, chairs, and desk they have already purchased. Because during the pandemic, no one was working in the office.

Adopting ATO 80 cents rate makes you eligible to forfeit your right; thus, you can claim expenses, like electricity, internet, and phone bills, while working from home.

Confusion! What to claim?

It’s a usual question the answer to which is essential to know. After all, the global pandemic has brought a unique working environment across each sector worldwide. But it’s necessary to know that not all expenses are claimable. Only those expenses incurred during working hours or a part of your work are claimable.

What can I do for the claim?

Just reveal the working hours, and pattern of expenses you have incurred during ‘work-from-home’ to the ATO. The taxpayers, who remain well-prepared with entire records, can reap the benefits of claim with ease. But don’t forget to keep receipts of each claim you obtain.

Top 5 Mistakes That People Make On Tax Returns- You Should Avoid

The end of the financial year is on the way! Hence loads of questions might be thriving inside you. Especially, after COVID-19 restrictions, what changes have been made in tax, is undoubtedly a critical point to note.

Already, the Australian Tax Office has brought loads of changes to make things easier. But that doesn’t mean that people forget the essential rules that apply to each taxpayer. Often, people make these five silly mistakes while filing the tax return. So, what are these? Let’s have a look at the points stated below.

Unclear Income

Most of the time, people never declare their entire income. According to the Australian Tax Office, it’s the most common mistake that people make. ATO wants that a taxpayer must declare every income from a regular job to temporary job during tax return. Even cash-in-hand, money earned from Cryptocurrency like Bitcoin, capital gains, etc. should be mentioned.

Claiming a deduction for things while being ineligible

ATO has three golden rules and wants people to follow the same while claiming the deduction.

  1. The things you want a claim on must be a part of the income generation process.
  2. Similarly, it should not be reimbursed instead of bought by the worker.
  3. A well-maintained record of the things on which you’re aspiring claim deduction

It’s essential to clear because most of the people also include the personal cost that isn’t a part of operational cost. In short, if traveling in your own car during working hours is a part of your job, then you can claim the deduction. Besides, most of the people also include laundry expenses for deduction without knowing the policy behind it.

Forgetting to keep receipts

It’s one of the essential things that every taxpayer must bear in mind. For instance,-most of the time, people either throw the receipts elsewhere or forget to take. Hence, the best practice that you must employ is getting both soft copy and hard copy for the receipt. For instance- you can ask authorities to send an email receipt and printed receipt for better assurance. However, you can also take the help of ATO’s My deduction app.

Claiming for non-paid deductions

If you haven’t paid money for work-related expenses from your own, then you can’t claim for deduction. Therefore, if it is reimbursed, then you aren’t eligible for claiming.

Rental properties

If you don’t want a red flag from the tax office to raise in your record, never put additional effort to claim for non-rented property expenses. Moreover, you can only claim the deduction if, during the pandemic, your property was genuinely available for rent or rented.

For every taxpayer, it’s essential to follow the guidelines. Otherwise breaking the rules of ATO is undoubtedly going to put you into big trouble.

Home office expenses

Source: https://www.ato.gov.au/

If you’re an employee who works from home, you may be able to claim a deduction for expenses you incur relating to that work. These can be additional running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses.

If your home is your principal place of business, you should refer to running your business from home.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home.

Expenses you can’t claim

There are some expenses you can’t claim a deduction for as an employee. Employees who work at home can’t claim costs:

  • for coffee, tea, milk, and other general household items your employer may otherwise have provided you with at work
  • related to children and their education including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
  • that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone.

Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.

Calculation methods

There are three ways of calculating home office expenses depending on your circumstances. The methods are the:

You must meet the record-keeping requirements and working criteria to use each method.

Use our Home office expenses calculators to help work out your deduction.

Shortcut method

We have introduced a shortcut method to simplify how you calculate your deduction for working from home. This method is temporary and only available for the period 1 March to 30 June 2020. All employees working from home in this period can use this method.

Using this method, you can claim 80 cents per hour for each hour you work from home during the period 1 March to 30 June 2020.

You can choose to use this rate if you:

  • are working from home to fulfil your employment duties, not just carrying out minimal tasks such as occasionally checking emails or taking calls
  • have incurred additional running expenses as a result of working from home.

The shortcut method covers all of your work from home expenses, such as:

  • phone expenses
  • internet expenses
  • the decline in value of equipment and furniture
  • electricity and gas for heating, cooling and lighting.

If you use this method, you can’t claim any other expenses for working from home.

You don’t need to have a dedicated work area to use this method. However, you must keep a record of the number of hours you have worked from home. This could be a timesheet, roster, a diary or documents that set out the hours you worked from home.

You don’t have to use the shortcut method, you can choose to use one of the existing methods to calculate your deduction. You can use the method or methods that will give you the best outcome as long as you meet the working criteria and record-keeping requirements for each method.

If you had a work from home arrangement before 1 March 2020, you will need to use one of the existing methods to calculate your deduction for the period 1 July 2019 to 29 February 2020.

The shortcut method includes a decline in the value of all items. If you choose to use this method there is no requirement to separately calculate the decline in value of equipment or depreciating assets. However, as you may combine methods or use a different method in later years it’s important to keep the:

  • purchase receipts for depreciating assets or equipment you use when working from home
  • records of how you calculated your work-related use of the asset
  • your decline in value calculations.

For more information about the shortcut method, see employees working from home during COVID-19.

Fixed rate method

You can claim a deduction of 52 cents for each hour you work from home for the work-related expenses you incur for additional running expenses. The fixed-rate covers all expenses you incur for:

  • the decline in value of home office furniture and furnishings – for example, a desk
  • electricity and gas for heating, cooling and lighting
  • the cost of repairs to your home office equipment, furniture and furnishings.

To claim using this method, you must keep records of either:

  • your actual hours spent working at home for the year
  • a diary for a representative four-week period to show your usual pattern of working at home.

You can apply the four-week representative period across the remainder of the year to determine your full deduction amount. However, if your work pattern changes you will need to create a new record.

To use this method, you need to have a dedicated work area, such as a home office when you work from home.

This method doesn’t include the following, so you will need to separately calculate your work-related use for:

  • phone expenses
  • internet expenses
  • computer consumables and stationery – such as ink
  • decline in value of equipment – such as phones, computers and laptops.

To claim the work-related portion of these expenses you must have records such as:

  • receipts or other written evidence that shows the amount spent on expenses and depreciating assets you purchased
  • phone accounts identifying your work-related calls and private calls to work out your percentage of work-related use for a representative period
  • a diary that shows
    • a representative four-week period of your usual pattern of working at home
    • any small expenses ($10 or less) that you can’t get a receipt for totalling no more than $200
    • your work-related internet use
    • the percentage of the year you used depreciating assets exclusively for work.

Actual cost method

Under the actual expenses method, you can claim the additional running costs you directly incur as a result of working from home. This may include the following expenses:

  • electricity and gas for cooling, heating and lighting
  • the decline in value of home office furniture (desk, chair) and furnishings,
  • the decline in value of phones, computers, laptops or similar devices
  • phone expenses
  • internet expenses
  • cleaning (if you use a dedicated area for working)
  • computer consumables and stationery – such as ink

If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. For example, if the area you use for work is a common area of the home such as a lounge room and that area is being used by other members of your household for another purpose (such as, family members watching television) at the same time you’re working, you won’t be incurring any additional costs for lighting, heating or cooling as a result of working in that room.

To calculate the work-related portion of your actual expenses you must have records. You can:

  • keep a record of the number of actual hours you work from home during the income year
  • keep a diary for a representative four-week period to show your usual pattern of working at home
  • work out the decline in value of depreciating assets and
    • keep receipts showing the amount you spent on the assets
    • show the percentage of the year you used those depreciating assets exclusively for work – you can claim for the portion of the decline in value that reflects your work-related use of the depreciating assets
  • work out the cost of your cleaning expenses (if you have a dedicated work area) – for example, a room set up as a home office, by adding together your receipts and multiplying it by the floor area of your dedicated work area (floor area of the dedicated work area divided by the whole area of the house as a percentage) – your claim should be apportioned for any
    • private use of your home office
    • use of the home office by other family members
  • work out the cost of your heating, cooling and lighting by working out the following
    • the cost per unit of power used – refer to your utility bill for this information
    • the average units used per hour – this is the power consumption per kilowatt hour for each appliance, equipment or light used
    • the total annual hours used for work-related purposes – refer to your record of hours worked or your diary for this information.
  • work out the cost of your phone or internet plan expenses – where you receive an itemised bill, you need to determine your percentage of work use over a four-week representative period. See, Claiming mobile phone, internet and home phone expenses.
  • work out the cost of computer consumables and stationery by keeping receipts for the items purchased.

You must take into account other members of your household when you work out your expenses. If a member of your household is using the same area of the house or the same service when you’re working, you must apportion your expenses accordingly.

To claim a deduction for an asset that cost $300 or more, you need to calculate the decline in value for both the period you:

  • owned the assets during the income year
  • used the assets for work-related purposes.

You can use the depreciation and capital allowances tool to calculate your deduction for the decline in value of equipment, furniture and furnishings that cost more than $300, use the depreciation and capital allowances tool to work this out.

You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year. It’s a fast, easy way to capture information on the go by taking and uploading photos of receipts.

Examples – comparing methods

Example 1: work out the method that gives the best outcome using a comparison of the deduction available for each method

Linus is employed as an engineer. Linus has an agreement with his employer to work from home one day per week and occasionally before or after a site visit. Linus’s employer provides him with a laptop and mobile phone, his employer also pays for the monthly mobile plan.

When Linus works from home he uses his own internet and has an office he uses as a dedicated work area. His monthly internet plan costs $69 per month.

Due to the COVID-19 situation Linus increases his work from home to five days per week starting on 17 March. Linus also continues to do site visits.

As Linus is working from home more, on 19 March he decides to buy an ergonomic chair for $249 to use. The rest of his office furniture is over 10 years old.

When completing his tax return, Linus usually claims his home office expenses using the fixed rate method. He keeps the required records to show how he calculates his claim. Linus uses his home office including the desk and chair for both work and private purposes. He works out that his private use is 10%.

Linus is aware of the increased fixed rate using the shortcut method for the period 1 March to 30 June 2020. As Linus’s work from home arrangement changed as a result of COVID-19, he can choose to use the method that works best for him so, he decides to do a comparison between the methods.

Calculating the time spent working from home

Linus looks at records he has kept for the year (these include a diary for a representative period of four weeks and his timesheets).

He works out that from 1 July 2019 to 29 February 2020, he worked from home for 12 hours per week on average. Except for the three weeks he had off over Christmas.

Linus calculates the hours he spent working from home for the period from 1 July 2019 to 29 February 2020 as:

(35 weeks − 3 weeks leave) × 12 hours per week = 384 hours

He determines his work-related internet usage was 10% for the period up until 16 March and 30% for the period from 17 March to 30 June 2020, taking into account his family’s use and his private use.

In the period 1 March to 16 March 2020, Linus continues to work from home for an average of 12 hours per week. The total hours worked from home during the two week period is:

12 hours per week × 2 weeks = 24 hours

From 17 March to 30 June 2020, Linus works out that he worked:

  • on site visits for a total of 75 hours
  • at home for 555 hours.

Linus can’t use any of the methods to claim for the cost of his work-related phone calls or the decline in value of his laptop and phone handset. This is because his laptop and phone are provided by his employer and his calls are paid for by his employer.

Based on his calculations (detailed in the examples below), Linus works out he would be able to claim:

  • $625.62 using the fixed rate method (52 cents) – see Example 2
  • $708.48 using a combination of the fixed rate (52 cents) and shortcut method (80 cents) – see Example 3
  • $613.77 using the actual cost method – see Example 4.

Linus decides to use the fixed rate method for the period 1 July 2019 until 29 February 2020 and the shortcut method from 1 March 2020 to 30 June 2020 as that gives him the best result.

Example 2: Linus’s deduction using the fixed rate method (52 cents)

Using the fixed rate method for the entire year, Linus calculates his deduction as:

(384 hours + 24 hours + 555 hours) × 0.52 (hourly rate) = $500.76

Linus also calculates his internet expenses as these are not covered by the fixed rate. Linus calculates his internet use for the period:

  • 1 July 2019 to 16 March 2020

8.5 months × $69 per month = $586.50

$586.50 × 10% = $58.65

  • 17 March to 30 June 2020

3.5 months × $69 per month = $241.50

$241.50 × 30% = $72.45

The 52 cents per hour rate covers the decline in value of office furniture, therefore Linus cannot claim a separate deduction for the decline in value of his chair.

Total deduction:

$500.76 + $58.65 + $72.45 = $631.86

Example 3: Linus’s deduction using the Fixed rate and Shortcut method

Using the fixed rate method for the period 1 July 2019 to 29 February 2020 and using the shortcut method for the period 1 March to 30 June 2020, Linus calculates his deduction as below.

Period from 1 July 2019 to 29 February 2020:

  • Fixed hourly rate

384 hours × 0.52 = $199.68

  • Internet expenses

8 months × $69 per month = $552

$552 × 10% = $55.20

Total claim amount is:

$199.68 + $55.20 = $254.88

Period from 1 March to 30 June 2020:

  • Shortcut rate:

(24 hours + 555 hours) × 0.80 = $463.20

Total deduction:

$254.88 (fixed rate) + $463.20 (shortcut rate) = $718.08

Linus doesn’t include the cost of the chair as the decline in value is included in both of the rates. He also doesn’t include his internet usage in the period from 1 March to 30 June as the internet usage is included in the shortcut rate.

Example 4: Linus’s deduction using the Actual costs method

Using this method, Linus will claim directly for any deductible expenses he incurs. He will need to have records for all of his expenses. For his running expenses he can claim his additional costs.

Internet expenses:

8.5 months × $69 per month = $586.50

$586.50 × 10% = $58.65

3.5 months × $69 per month = $241.50

$241.50 × 30% = $72.45

Deduction amount:

$58.65 + $72.45 = $131.10

Decline in value of office chair:

As the cost of the office chair was less than $300, Linus can claim the full cost in the year it was purchased. However, it must be apportioned to account for his private use.

Decline in value calculation:

$249 × 90% (work use percentage) = $224.10

Electricity

Linus uses electricity for his computer and to light, cool and heat his home office while he is working at home. Based on his records he:

  • used his air conditioning for 50% of the time he spent working from home – the air conditioner uses 2kW for cooling and heating per hour.
  • used two 12 watt LED lights in the office whenever he is working.
  • used his laptop whenever he is working from home – the laptop uses 50 watts per hour.
  • pays 25 cents per kW hour for electricity.

Lighting

12 watts ÷ 1000 = 0.012 kW

0.012kW × (2 × 25 cents) = 0.6 cents

0.006 cents × 963 hours = $5.78

Air conditioner

2kW × 25 cents = 50 cents

0.50 cents × (963 × 50%) = $240.75

Laptop

50 watts ÷ 1000 = 0.05kW

0.05 × 25 cents = 1.25 cents

0.0125 cents × 963 hours = $12.04

Total claim:

$131.10 + $224.10 + $5.78 + $240.75 + $12.04 = $613.77

Records for change in circumstances

Regardless of the method you choose to use to calculate your expenses for working from home, you will need to have records.

If your circumstances change part way through the income year – for example, your usual pattern of work from home changes – you will need to keep separate records to show this change.

If you use the four-week representative period to calculate your usage over the income year, you will need to either:

  • complete a new four-week representative period to show your usage in your new circumstances
  • keep separate records for the period your circumstances changed.

For example, if you usually work from home one day a week and due to an emergency situation such as COVID-19 or bush fires you’re required to work from home for a period, you will need to keep separate records for both situations. This includes:

  • the actual hours you’ve worked from home due to the emergency situation
  • your usual working from home arrangements.

Your four-week representative period will no longer be valid in these circumstances.

Claiming mobile phone, internet and home phone expenses

Source: https://www.ato.gov.au/

If you use your own phone or internet for work purposes, you may be able to claim a deduction if all of the following conditions apply:

  • you spent the money yourself
  • the expense is directly related to earning your income
  • you must have a record to prove it.

You can’t claim a deduction where you haven’t incurred any expenses, or you’re reimbursed for any costs by your employer.

For employees working from home as a result of COVID-19, we have specific information available about claiming home office expenses, including phone and internet expenses.

If you use your phone or internet for both work and private use, you will need to work out the percentage that reasonably relates to your work use.

Substantiating your claims

To claim a deduction of more than $50, you need to keep records for a four-week representative period in each income year. These records may include diary entries, including electronic records, and bills. Evidence that your employer expects you to work at home or make some work-related calls from home will also help you show that you are entitled to a deduction.

When you can’t claim a deduction for your phone

Employer-provided phone

If your employer provides you with a phone for work use and they are billed for the usage (phone calls, text messages, data) then you can’t claim a deduction. Similarly, if you pay for your usage and are then reimbursed by your employer, you can’t claim a deduction.

Costs you incur before work commences

If you use your phone to seek employment you can’t claim a deduction as you are not yet generating income from the use of the phone.

Similarly, if you are a casual employee and an employer calls you to ask you to work, or you call them to check on work availability, you can’t claim a deduction. The cost is not considered to be one that directly relates to your income-producing activities. Instead, it’s an activity that is putting you in a position to earn that income.

You can only claim a deduction for the portion of your phone use when you’re earning assessable income and your employer requires you to use your phone directly in earning that income.

For more information on costs that are usually considered private or capital in nature and are disallowed or which require apportionments, such as installation costs, line rental, and joint usage expenses, see the Employees guide for work expenses.

How to apportion work use of your phone

As there are many different types of plans available, you will need to determine your work use using a reasonable basis.

Incidental use

If your work use is incidental and you are not claiming a deduction of more than $50 in total, you may make a claim based on the following, without having to analyze your bills:

  • $0.25 for work calls made from your landline
  • $0.75 for work calls made from your mobile
  • $0.10 for text messages sent from your mobile.

Usage is itemized on your bills

If you have a phone plan with an itemized bill, you need to work out your percentage of work use over a four-week representative period, which you can then apply to the full year.

You need to work out the percentage using a reasonable basis. This could include the:

  • number of work calls made as a percentage of total calls
  • amount of time spent on work calls as a percentage of your total calls
  • amount of data downloaded for work purposes as a percentage of your total downloads.

Example: Phone calls are itemized on your bill

Julie has an $80 per month mobile phone plan, which includes $500 worth of calls and 1.5GB of data. She receives a bill that itemizes her phone calls and provides her with her monthly data use.

Over a four-week representative period, Julie identifies that 20% of her calls are work-related. She worked for 11 months during the income year, having had one month of leave. Julie can claim a deduction of $176 in her tax return (20% × $80 × 11 months).

Usage is not itemized on your bills

If you have a phone plan where you don’t receive an itemised bill, you determine your work use by keeping a record of all your calls over a four-week representative period and then calculate your claim using a reasonable basis.

Example: Non-itemised account

Ahmed has a prepaid mobile phone plan that costs him $50 per month. Ahmed does not receive a monthly bill so he keeps a record of his calls for a four-week representative period. During this four-week period, Ahmed makes 25 work calls and 75 private calls. Ahmed worked for 11 months during the income year, having had one month of leave.

Ahmed calculates his work use as 25% (25 work calls ÷ 100 total calls). He claims a deduction of $138 in his tax return (25% × $50 × 11 months).

Bundled phone and internet plans

Phone and internet services are often bundled. If you are claiming deductions for work-related use of one or more services, you need to apportion your costs based on your work use for each service.

If other members in your household also use the services, you need to take into account their use in your calculation.

If you have a bundled plan, you need to identify your work use for each service over a four-week representative period during the income year. This will allow you to determine your pattern of work use, which you can then apply to the full year.

A reasonable basis to work out your work-related use could include:

  • Internet
    • the amount of data downloaded for work as a percentage of the total data downloaded by all members of your household
    • any additional costs incurred as a result of your work-related use, for example, if your work-related use results in you exceeding your monthly cap.
  • Phone
    • the number of work calls made as a percentage of total calls
    • the amount of time spent on work calls as a percentage of your total calls
    • any additional costs incurred as a result of your work-related calls, for example, if your work-related use results in you exceeding your monthly cap.

Example: Apportioning bundled services

Sujita has a $100 per month home phone and internet bundle. The bill identifies that the monthly cost of Sujita’s phone service in her bundle is $40, and her internet service is $60. Sujita brings in her mobile phone plan of $90 per month and receives a $10 per month discount. Her total costs for all services are $180 per month.

Sujita worked for 11 months during the income year, having had one month of leave.

Based on her itemised accounts, Sujita determines that the work-related use of her mobile phone is 20%. Sujita also uses her home internet for work purposes and based on her use she determines that 10% of her use is for work. Sujita does not use her home phone for work calls.

As the components are part of a bundle Sujita can calculate her work-related use as follows:

Step 1 – work out the value of each bundled component

  • Mobile phone: $90 per month minus the $10 per month discount = $80 per month
  • Internet: $60 per month
  • Home phone: Sujita does not need to determine the home phone costs as she does not use this service for work purposes.

Step 2 – apportion work-related use

  • Mobile phone use: 20% work-related use × $80 per month × 11 months = $176
  • Home internet use: 10% work-related use × $60 per month × 11 months = $66

In her tax return, Sujita claims a deduction of $242 for the financial year ($176 mobile phone use + $66 home internet use).

Example: Apportioning bundled services

Des has a $90 per month home phone and internet bundle, and unlimited internet use as part of his plan. There is no clear breakdown for the cost of each service. By keeping a record of the calls he makes over a four-week representative period, Des determines that 25% of his calls are for work purposes. Des also keeps a record for four weeks of the data downloaded and determines that 30% of the total amount used was for work.

Des worked for 11 months during the income year, having had one month of leave.

As there is no clear breakdown of the cost of each service (calls and downloads), it is reasonable for Des to allocate 50% of the total monthly cost to each service.

Step 1 – work out the value of each bundled component

  • Internet: $45 per month ($90 ÷ two services)
  • Home phone: $45 per month ($90 ÷ two services)

Step 2 – apportion work-related use

  • Internet: 30% work-related use × $45 per month × 11 months = $149
  • Home phone: 25% work related use × $45 per month × 11 months = $124

In his tax return, Des claims a deduction of $273 ($149 + $124) for the year.

Purchasing a smartphone, tablet or other electronic devices

If you bought a smartphone, tablet or other electronic device and you use it for work you can claim a deduction for a percentage of its cost.

Work related deductions you can claim

When completing your tax return, you’re entitled to claim deductions for some expenses, most of which are directly related to earning your income.

Work-related expenses

To claim a work-related deduction:

  • you must have spent the money yourself and weren’t reimbursed
  • it must directly relate to earning your income
  • you must have a record to prove it.

If the expense was for both work and private purposes, you can only claim a deduction for the work-related portion. Work expenses reimbursed to you by your employer are not deductible.

We can seek information from your employer if we think you have claimed a deduction for an expense that you have already been reimbursed for.

You may be able to claim a deduction for expenses that directly relate to your work, including:

  • Vehicle and travel expenses
  • Clothing, laundry and dry-cleaning expenses
  • Home office expenses
  • Self-education expenses
  • Tools, equipment and other assets
  • Other work-related deductions

Employees (including casuals) can claim work-related expenses in the financial year they are incurred. This is the case even if you start employment in June but don’t receive income until the next financial year, you can claim deductions for work-related expenses incurred in June.

If you employ someone to assist you in your employment, you can’t claim a deduction for employing that person.

Other deductions

You may also be able to claim a deduction for:

  • ATO interest – calculating and reporting
  • Cost of managing tax affairs
  • Gifts and donations
  • Interest charged by the ATO
  • Interest, dividend and other investment income deductions
  • Personal super contributions
  • Undeducted purchase price of a foreign pension or annuity

Occupation and industry specific guides

To find out more about income, allowances and deductions you can claim for work-related expenses in your industry or occupation, see Occupation and industry specific guides.

 

*News Source (ATO) – https://bit.ly/2VVT1cx

The worth of a good tax accountant in hassle-free tax planning

You can’t deny the fact that tax professionals and accountants are worth their weight during the tax time. The rules and regulations associated with tax can be painful to wade through. While some businesses may only require simple accounting and may not need an accountant for day-to-day activities, as companies grow and entrepreneurs look to maximize their business and household incomes, hiring an accountant makes your money well spent.

Your taxes are complex:

Let’s be honest, most of us are unable to deal with our taxes. There are a plenty of programs that can help if you want a little guidance but if your taxes are becoming increasingly complex, it makes sense to hire a tax accountant now. For example- your taxes include a new business venture, major financial change or a divorce that can get complicated.

Accountants help in preventing audits:

Being audited once is a minor hassle but being audited repeatedly is a major ordeal. If errors are noted in your tax filing, this is exactly what can happen.

The best way to prevent any miscalculations in a tax return is to hire an accountant. Not only will your accountant reduce the likelihood of an audit but you can rest assured knowing that everything is in proper order. The chances are good you will be glad to have someone in your corner who knows your tax returns better.

Helps in allocating funds properly:

Since accountants know the numbers in your business (quite possibly even better than you do). A tax accountant can be a good pedagogue when you’re about to make a big investment or looking to expand your business. For example, if you need to invest more money you can delegate tasks that aren’t getting you enough funds.

So what can you do? You can ask your accountant to figure it out. He will be more than happy to oblige and a good accountant should do the same.

An erudite accountant is a powerful ally to have on your side. Make sure to utilize all the services they offer in order to keep your business thriving. You can also seek help from various online portals offering top-notch tax accountants in Melbourne.

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