Australians are being warned this tax time not to double dip on working-from-home claims, make sure they have detailed records of expenses and not to lodge their tax returns too early.
Last financial year, almost 9 million Australians claimed about $24.5 billion worth of work-related expenses (as of March 31), many relating to working from home.
The average claim made by taxpayers was about $3,000.
Assistant Commissioner Rob Thomson says more than 5 million Australians claimed working-from-home expenses last financial year, but some mixed up the methods they used to make claims that essentially resorted to double dipping.
He says there are two different methods for claiming: the fixed rate method and the actual cost method.
What's the fixed rate method for work-from-home claims and what are its limits?
The fixed rate method allows people to claim a fixed amount of 67 cents per hour for every hour they work from home.
It doesn't require you to apportion expenses between private and work.
But it also restricts you from claiming each expense item separately. It assumes all your expenses were at that rate and takes in:
- home and mobile internet or data expenses
- mobile and home phone usage expenses
- electricity and gas (energy expenses) for heating, cooling and lighting
- stationery and computer consumables, such as printer ink and paper
Tax agents have previously warned that the 67 cents per hour method could result in a lower tax deduction.
But the fixed rate method does not involve record keeping as onerous. If you use a tax agent to lodge your tax return, it's best to check with them what the best method to use is for work-from-home claims.
"One thing we're focused on this year is making sure that people don't double dip, so they don't claim things like their internet or their phone expenses separately if they're using that fixed rate method," Mr Thomson says.
"The other thing we're focused on is the record keeping.
"People need to keep a record of all the hours they've worked from home for the whole year. Now that can be a time-sheet, that can be a spreadsheet, that can be a diary, whatever the person wants that works for them."
How the 'actual cost' method works
Here you can claim each expense you have for working from home separately.
But you need to apportion what's private and what's work-related.
You can claim separately for:
- the decline in value of depreciating assets — for example, home office furniture (desk, chair) and furnishings, phones and computers, laptops or similar devices
- electricity and gas (energy expenses) for heating, cooling and lighting
- home and mobile phone, data and internet expenses
- stationery and computer consumables, such as printer ink and paper
- cleaning your dedicated home office
"Here we're focused on making sure people have really good records," Mr Thomson says.
"Those records need to have receipts for every type of expense that they're looking to claim — so your phone bill, your electricity bill — but they also need to show how you've apportioned it between any personal use and any work-related use.
"With the internet (work-related expense claims), if your kids are watching Netflix, obviously you can't claim that."
Car-related travel claims under focus when it comes to work expenses
In terms of work expenses generally, car expenses are a major area claimed at about $9 billion each year.
Mr Thomson reminds taxpayers there's two different methods they can use.
First, there's the cents per kilometre method. Under this method, you can claim 85 cents per kilometre you travel for work, but that's an all-inclusive method.
"We're reminding people, if they're using that method, that that already includes things like your rego (registration) and your fuel and your insurance, so you can't claim those things separately on your tax return," Mr Thomson says.
Then there's the logbook method.
"We're reminding people that need to keep a logbook for 12 weeks, which is a representative sample of their typical work pattern and … how they drive their vehicle," he adds.
"On that, we're reminding people they need to keep receipts for each type of expense that they're looking to claim under the logbook method.
"They can't use credit card statements or a bank statement as evidence for an expense, they also do actually need to have the receipt."
Investors with rental properties and holiday homes under watch again
In 2022-23, 1.63 million individual investors claimed tax deductions that resulted in an average net rental income of $161 down from $1,975 the year before.
Mr Thomson says taxpayers need to make sure they include all the income and deductions received for their investment property.
"On the deduction side, we're seeing people are forgetting to apportion any interest on the loan between any personal use and the investment property.
"For example, (if) they've purchased a car with the same loan facilities as their investment property, then they need to apportion the interest."
He says they are also seeing issues when it comes to claims for repairs and maintenance.
"What we're asking people is, if investors are spending money on their property this year, to make sure they understand the tax consequences of it, and just don't think it's an instant write-off as a repair," Mr Thomson says.
"For example, if you replace the air conditioner, you can't write that off instantly. In the year that you buy the air conditioner, you'll typically need to depreciate that over what's called its effective life."
He says the ATO has information on its website that allows people to better understand those rules.
For people who have holiday homes that they rent out for part of the year, Mr Thomson reminds them: "It's like any other, any other kind of investment you have, if you're using that investment at all for any personal use, then you need to apportion between personal use and the income that you're generating".
Hundreds of thousands of Australians buy and sell cryptocurrencies
Almost 400,000 people bought or sold cryptocurrencies last financial year.
Mr Thomson says about 30 per cent of Australians don't keep any records when it comes to cryptocurrencies.
"We're just reminding them they need to keep good records," he says.
"And that could include just downloading your transaction wallet every three months, but definitely before you close out your crypto account.
"Crypto is a CGT asset. So any time that you buy or you sell or you dispose of any crypto, then it can potentially have a capital gains tax event.
"You'll need your records to be able to work out how much either capital gain or capital loss you've made on your crypto."
'Don't lodge too early', wait for the ATO to pre-fill your tax return
Mr Thomson says other common errors arise because people lodge too early.
"We're just encouraging people to wait to lodge their tax return until the end of July," he says.
"It's not the Olympics … you don't need to get gold: make sure you get it right the first time."
He says by the end of July, the ATO will have pre-filled a lot of information into people's tax returns for them, which makes it simpler and easier for them to lodge.
"Last year, we pre-filled over 111 pieces of information into people's tax returns," he notes.
Editor's note: In the video ATO Assistant Commissioner Rob Thomson says that “you can claim 87 cents per kilometre you travel for work”. He meant to say 85 cents per kilometre.