How To Claim Tax Back On Work Expenses

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How To Claim Tax Back On Work Expenses for This Tax Season

Written by: Anshul Gupta l Accounting Team

What you can and what you can’t claim on this year’s tax return may be a bit of a prickly topic for some, but the changes brought on by the COVID-19 Pandemic has caused the world of business and employment over the last 18 months to rethink how and where we earn a living.  This in turn has meant a change in how many of us will meet our yearly tax payment requirements.

Recently the Australian Tax Office (ATO) warned that it would be looking closely at expenses claimed for the 2020/21 tax period.  They have also advised that expenses such as travel, car maintenance and clothing expenses are expected to be lower for many people, whereas new items – such as face masks, hand sanitiser and personal protective equipment (PPE) and clothing – will be incurred by others, particularly those working in the health system as well as our frontline services.

As well as healthcare, employees in industries such as hair and beauty, cleaning, hospitality, and retail – i.e., those whose occupations involve close contact with others – may be eligible to claim PPE-related items such as gloves, face masks, sanitiser and/or anti-bacterial sprays.

Some of the other common claims the ATO will be focusing on include meal expenses for travel, internet usage and phone usage.

Of course, the standard rules for work-related expenses still apply;

 The expenses must directly relate to your earning an income, and records must be kept to demonstrate the validity of the expenses

However, total work-related expenditure of less than $300 doesn’t require receipts to be kept, and for phone and internet expenses, the claims of up to $50 don’t require receipts.

Financial Information + Simplifying The Process

Recognising the rapidly changing recent situation, the Australian Tax Office has announced a temporary ‘short cut’ method for claiming working from home expenses and home business expenses, which simplifies the process – rather than separately calculating different costs and expenses, an all-inclusive rate of 80 cents per hour can be claimed.  Claimants can simply multiply the hours worked from home by this rate, with backup evidence recorded in the form of time sheets, rosters or log/diary entries.  This initiative is not expected to continue in the long-term, so the ATO advises that expenses above $300 that may be part claimed in the future years will still require a receipt.

There is, however, a caveat with using this simplified method – it includes everything, so no additional individual expenses can be claimed.  Also, it may result in a smaller tax refund.  The comparison between this new method and the usual method of claim calculation should be examined carefully, preferable with the assistance from your finance/tax adviser – like the Accounting team at Canny Group.

Financial Records

Home Is Where The Work Is

Working from home as an employee is different from a home-based business or a self-employed person whose home is in their principal place of work, and accordingly, the rules are different for claiming expenses and deductions.

Home Office Expenses

The biggest change to many workers’ situations and personal income taxation recently has undoubtedly been more home-based than office-based work and subsequently claiming of home office expenses due to COVID-19 issues as well as restrictions.

Home office expenses include depreciation of computer equipment, business related telephone usage, cleaning, lighting, heating and cooling; however, they do not include any component of occupancy costs such as mortgage payment, rent or rates.  Those claiming home office expenses will be employees who are performing substantial duties at home that they would otherwise perform at the employment premises, and they must be incurring additional expenses as a result of this.

Depreciation of equipment can be complex to understand and may be a source of errors in making claims and deductions.  Purchase of a work item costing over $300 is not claimed as a full deduction on the next tax return that you lodge but is claimed over the ‘life’ of the item.  It is important to note that this will differ for items such as items like office furniture and computer equipment.  Details of the ‘life’ of each item need to be determined by the criteria available from the ATO, and your financial/tax advisor can assist with this.

However, some restrictions still apply to these expenses.  For example, employees working from home but travelling occasionally to their office or place of employment are not able to claim these trips as expenses.  Unless the employment requires using the car to travel between multiple work sites, the occasional travel to the office or place of employment is considered private travel.  Also, for those working in trades or on building sites, expenses for transporting bulky tools and equipment can only be claimed if there are no other options for secure tool and equipment storage, such as on site.

In some cases, if you are an employee but your employer – for whatever reason – does not or cannot provide you with a workspace on the employment premises, you may be eligible to claim occupancy expenses (detailed below if you can provide suitable evidence.  However, as this is not likely to be a common occurrence, the ATO’s evidence requirements are likely to be strict.

Home-based Business Expenses + Deductions

These are also referred to as occupancy expenses, which include:

  • Mortgage Interest
  • Rates
  • House Insurance
  • Office Equipment

To determine how much to claim, it is necessary to determine how much of your dwelling is taken up by your home office set up.  Also, to claim the specific mortgage, rent, and/or rates expenses your home office must meet the ATO’s criteria:

  • You must have a clearly identifiable place of business, such as relevant signage at the front of your residence
  • The home office area must not be readily suitable or adaptable for private or domestic purposes
  • The home office must be used exclusively (or almost exclusively) for carring on your business and must be used regularly for visits by your clients

Find The Accountants Geelong trust for help… Canny Group!

While the ATO recognises that things have changed in recent times and that way in which everyday Australians are now working, while the Australian Tax Office is accepting that people will make genuine mistakes, they are in no way relaxing their stance on investigating potentially fraudulent claims.

Even genuine mistakes in lodging tax returns and claiming expenses can cause stress and delay in returns that you may be entitled to.  We can’t stress enough to make sure that you consult your financial or tax expert, like your team at Canny Group and their expertise in Accounting.

If you have questions on what you can and can’t claim, and how to make the best of your current work or employment situation in what has been another challenging year, please get in touch and find out why we are the accountants Geelong turn to for trusted individual and business advice when it comes to ensuring you are meeting all of your ATO obligations.

Accountant Anshul Gupta standing centre in the photo wearing a dark grey suit with a white shirt underneath with his hands in the centre as he is doing up his suit jacket

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