Australians working from home have been given a stern warning ahead of their tax return as they could get into trouble due to a sneaky measure.
The ATO has announced it will be cracking down on the costs of working from home this year, while warning Australians not to pay double fees when filing their tax returns.
As remote or hybrid work models become the norm, more and more people are claiming deductions for working from home on their tax returns.
Last year, more than eight million people claimed work-related tax deductions, about half of them for working from home.
ATO Assistant Commissioner Rob Thomson said working from home expenses are one of the areas where people are most likely to make mistakes, which is why they are coming under close scrutiny this year.
He said that while these errors are often genuine, there are also cases where they are “intentional.”
Employees can calculate deductions for home working in two different ways: using the flat rate method and the actual cost method.
Mixing these methods often results in people “double-paying,” whether they realize it or not.
“One thing we’re focusing on this year is making sure people aren’t double-billing and claiming things like their internet or phone costs separately when they use that flat rate method,” Mr Thomson told ABC, adding that the other focus was on accounting.
“People need to keep track of all the hours they’ve worked from home throughout the year. It can be a timesheet, a spreadsheet, a diary – whatever the person wants and what works for them.”
How to use the different methods
Under the flat rate method, you can claim 67 cents for each hour you worked from home in the relevant tax year.
This tariff includes the additional ongoing costs you incur for:
– Internet or data costs at home and on your mobile phone
– Costs for the use of mobile and landline telephones
– Electricity and gas (energy costs) for heating, cooling and lighting
– Stationery and computer consumables such as printer ink and paper.
If you use this method, you cannot claim an additional separate deduction for any of these expenses.
However, there are some things you can claim a separate deduction for, including work-related use of technology and office furniture such as chairs, desks, computers and bookshelves.
If the item costs $300 or less and you use it primarily for business purposes, you can deduct the cost immediately in the year of purchase.
You can also deduct the loss in value of depreciable assets.
Under the actual cost method, the taxpayer calculates his deduction by calculating the actual additional costs incurred by working from home.
This includes expenses for:
– the loss in value of assets that lose value, such as furniture (desk, chair) and furnishings in the home office, telephones and computers, laptops or similar devices.
– Electricity and gas (energy costs) for heating, cooling and lighting
– Telephone, data and internet costs for landline and mobile phone
– Stationery and computer consumables such as printer ink and paper
– Cleaning your dedicated home office
You can only claim the portion of these costs that is related to work. For example, if you use your cell phone 40 percent of the time for work and the rest for private purposes, you can only claim 40 percent of your phone bill on your tax return.
Richard Whitten, financial expert at Finder, told news.com.au that the actual cost method allows for a more “detailed” calculation, while the fixed price method covers more “generic” expenses.
“Having your own workplace at home justifies claiming part of the electricity and cleaning costs,” he says, referring to the actual cost method.
“Remember to keep receipts and documentation to support your deductions. This will make it easier to substantiate your deductions if the ATO asks for proof.”
Mr Thompson also warned people not to use the exact same work from home deductions as last year as doing so could result in an unpleasant call from the ATO.
“It may be tempting to copy and paste your home working claim from last year, but that probably means we will contact you to ask for an explanation,” he said.
“Your deductions will not be allowed if you are not eligible or do not keep proper records.”
Australians admit to lying on their tax returns
According to a recent Finder survey of more than 1,000 Australians, one in ten admitted to lying on their tax returns.
The study found that five percent made more deductions than planned and three percent did not declare their foreign income.
Another two percent did not report their capital gains or crypto income.
It seems that younger generations are more likely to lie on their taxes: 17 percent of Generation Z and 15 percent of Millennials admit to lying about their finances.
In comparison, the figure for Generation X and Baby Boomers is only five percent.
Sarah Megginson, financial expert at Finder, warns against lying in the hope of a larger tax refund.
“Even a mistake you didn’t mean to make can cause problems. Don’t risk making things worse by trying to game the system,” she said.
“If you have a complex tax situation, leave it to the professionals. They can guide you through the process and make sure everything is filed correctly.”