Work from home expenses: new rate

Grahame Allen • February 24, 2023

From the 2022-23 income year, taxpayers can no longer rely on the 80c per hour shortcut method with the introduction of the revised fixed-rate method for calculating the work-related additional running expenses incurred as a result of working from home (WFH). Taxpayers are still able to use the actual costs method to calculate the actual expenses incurred as a result of WFH as an alternative to the revised fixed-rate method. To use the new revised fixed-rate method, taxpayers must: work from home while carrying out employment duties or carrying on a business on or after 1 July 2022 (minimal tasks such as occasionally checking emails or taking phone calls while at home will not qualify as working from home); incur additional running expenses which are deductible under Income Tax Assessment Act 1997 (Cth) s 8-1 as a result of working from home that are not reimbursed by a third party (ie employer); and keep and retain relevant records in respect of the time spent working from home and for the additional running expenses incurred. The new revised fixed-rate method covers energy expenses including electricity and gas for lighting, heating, cooling, and use of electronic items while working. It also covers internet, mobile, home phone expenses, as well as stationery and computer consumables such as ink. While the new revised fixed-rate method of 67c per hour is lower than the previously available shortcut method, it does not include the work-related decline in value of any depreciating assets used during the income year or any other running expenses not specifically covered above. However, 3 years into the pandemic, with many taxpayers having already purchased depreciating assets early in the piece to be able to perform their duties effectively from home, the lower revised fixed-rate method means many taxpayers will be losing around $100 in deductions going forward. For example, a taxpayer working 3 days per week from home at 8 hours per day over 49 weeks will only be able to get a deduction of $787 under the new rate compared to $940 they would previously be able to claim under the shortcut method. In addition, if a taxpayer chooses to use the new revised-fixed-rate method, no additional separate deductions can be claimed for any of the expenses covered. This includes instances where taxpayers use their personal mobile phones for both working from home and working elsewhere (ie in the office). The total deduction for the year would consist of the amount covered by the amount of 67c per hour. Taxpayers that chose to use this new method need to ensure that relevant records are kept. For the 2022-23 income year only, taxpayers will need to keep a record which is representative of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023, and a record of the total number of actual hours worked from home for the period 1 March 2023 to 30 June 2023. For 2023-24 and later income years, taxpayers must keep a record for the entire income year of the number of hours worked from home during that income year. An estimate for the entire income year or an estimate based on the number of hours worked from home during a particular period and applied to the rest of the income year will not be accepted. A record of hours worked for the entire income year can include timesheets, rosters, logs, time tracking apps, and diaries that are kept contemporaneously. To be able to claim expenses for 2022-23 and later income years, one document for each of the additional running expenses incurred must be kept. For energy, mobile, phone and internet, one monthly or quarterly bill in the relevant name must be kept. If the bill is not in the relevant name, additional evidence such as credit card statements showing payment or lease agreements showing sharing of property and expenses must be present. For stationery and computer consumables, receipts must be kept for any purchases. Those claiming a deduction for any decline in value of depreciating assets must also keep documents which demonstrate the income-producing use of the assets.

Accessing super from age 60 to 65

By Grahame Allen • August 30, 2024
From 1 July 2024, the rules for accessing superannuation became somewhat simplified: the preservation age when you can begin to access your benefits is now effectively age 60. However, until you reach age 65, there are still potential restrictions on how you can access your super. You’ll need to “retire” before you can make lump sum withdrawals from your super account or move it into the favourable “retirement phase” when investment earnings within the fund become tax-free. If you’re aged between 60 and 65 and wish to access some of your super, now is a good time to re-examine the rules. 60 is the new threshold For anyone born after 30 June 1964, preservation age is simply age 60. You may recall that some members could previously begin to access their superannuation at various stages between 55 and 59 years. Those lower preservation ages applied for older Australians who are now all over 60 and who have already attained their preservation age. Therefore, those rules regarding ages 55 to 59 are no longer an active consideration. How much super can I access? If you are between 60 and 65 years old but haven’t yet retired, you can commence a transition to retirement income stream (TRIS). This allows you to receive a regular income of between 4% and 10% of your pension account balance each year. If you want to access more of your super, or withdraw it as a lump sum, you’ll need to satisfy a further condition of release. This includes: reaching age 65; or “retirement”. Meeting these conditions also becomes relevant for tax purposes. While TRIS payments to a person aged 60 or over are generally tax-free – regardless of whether they are retired or not – the TRIS itself does not move into the “retirement phase” until a further condition such as retirement (or reaching age 65) is met. This means that while you may start a TRIS, the TRIS will not qualify for the tax exemption on the investment earnings from fund assets that support the TRIS until you meet one of those further conditions. What does “retirement” mean? To satisfy the “retirement” condition, the first key requirement is that an arrangement under which you were gainfully employed must have come to an end. If you had already reached age 60 when that position of gainful employment ended, there are no further requirements, and your future work intentions are not relevant. However, if you had not yet reached aged 60 when that position ended, the trustee of your fund must be reasonably satisfied that you intend never to again become gainfully employed, either on a full-time or a part-time basis. For these purposes, “part-time” means working for at least 10 hours per week. This means you could intend to work for less than 10 hours per week and still meet the “retirement” condition. Planning is key Any withdrawal strategy should be carefully planned beforehand to ensure you understand the implications of accessing your super. There are many factors to consider, such as: the ongoing requirement to withdraw minimum pension amounts each year if you start a pension; implications for your transfer balance account; and interaction with the Age Pension. Contact our office if you need help understanding your eligibility for accessing your super, or to begin a discussion about your long-term retirement planning.

Super guarantee a focus area for ATO business debt collection

By Grahame Allen • August 16, 2024
The ATO has revealed its focus areas for this year, with business debt collection identified as a key strategic priority. In its Corporate Plan 2024–25, the ATO says that it will have “an increased focus on business debt including superannuation guarantee, pay as you go withholding and goods and services tax”. This is a timely reminder for all businesses to ensure they’re meeting their obligations. Superannuation guarantee (SG) remains an important compliance focus. The most recent ATO statistics show that although 94% of employers are meeting their SG obligations without ATO intervention, the ATO still raised over $1 billion in SG charge liabilities in the 2022–23 financial year. That figure reflects a lot of extra super liability for Australian businesses that could have been avoided if they had paid the required SG contributions on time. To ensure your business doesn’t incur these extra liabilities, you must pay SG contributions for your employees and eligible contractors on time and to the correct fund. The quarterly due dates are as follows: Q1 (1 July – 30 September): 28 October; Q2 (1 October – 31 December): 28 January; Q3 (1 January – 31 March): 28 April; and Q4 (1 April – 30 June): 28 July. Some important things to remember include: Some contracts and awards may require you to pay contributions more regularly than quarterly. If you make contributions to a commercial “clearing house”, the contribution is considered to be paid when it’s received by the employee’s fund, not by the clearing house. However, if you use the ATO’s Small Business Superannuation Clearing House, the contribution is “paid” when received by that clearing house. From 1 July 2026, employers will need to pay SG at the same time as salary and wages (commonly known as “payday super”). What if my business misses an SG payment? Taking action promptly is essential to accessing the ATO’s support services and minimising your exposure to penalties. The ATO says that it’s willing to work with employers who want to put things right. When you miss a payment, you must lodge an SG charge statement with the ATO within one month of the missed quarterly due date. Lodging on time is important, as failing to do so will incur a further penalty known as a “part 7 penalty”, which can be up to 200% of your SG charge liabilities. Also, when you lodge on time, you may then be able to set up a payment plan to pay your liabilities in instalments. You can ask the ATO for an extension to the lodgement date, but you must do this before the due date. You’ll also need to pay the SG charge. This charge is more than the amount of contributions you would have paid if you had paid them on time, and it’s not deductible. The charge comprises: the amount of the missed contributions (but calculated on salary and wages, including overtime, which is more than the usual “ordinary time earnings” basis for on-time SG contributions); interest of 10% pa (which accrues from the start of the relevant quarter); and an administration fee of $20 per employee, per quarter. This is paid to the ATO, not your employee’s fund. General interest charge will accrue on any outstanding SG charge, and the ATO may also issue a director penalty notice if it remains unpaid. We’re here to help Mistakes happen, but getting on top of problems early will lead to a better outcome for your business. Contact our office for expert assistance in addressing your business’s SG obligations.

Claiming the tax-free threshold: getting it right

By Grahame Allen • August 9, 2024
If you’re an Australian resident for tax purposes, you don’t have to pay income tax on the first $18,200 you earn each year, from any source. This is called the “tax-free threshold”. If you have multiple income sources, it’s important to consider which one you’ll claim it for. The ATO advises claiming the tax-free threshold once from your “main” payer – typically the job, gig or payment that pays you the most during the year. That payer will not withhold income tax from the first $18,200 they pay you but will withhold tax from payments once your earnings go over the threshold. At the end of the financial year, the ATO calculates your total income and tax withheld. If not enough tax has been withheld, you can expect a tax bill. If more tax has been withheld than you owe for your total earnings, you can expect a refund. Claim the tax-free threshold When starting a new job, your employer should ask you to complete a withholding declaration. To claim the tax-free threshold, you must be an Australian resident for tax purposes on the declaration and answer “yes” to the question “Do you want to claim the tax-free threshold from this payer?”. Where you answer “no”, tax will be withheld from all income from that payer. Avoid claiming the threshold from multiple payers simultaneously unless you’re sure you’ll earn less than $18,200 total for the year. Overclaiming might make your take-home pay higher each pay cycle but will likely mean a tax debt later. Changing jobs When changing jobs you can claim the threshold from your new payer even if you have claimed it from your previous one. If you add a job or side gig that will provide more income than your existing main payer, you can change your claim at any time. Altering your tax-free threshold claim Change your claim using ATO online services, via your myGov account: Sign in to myGov and access ATO online services Select Employment from the menu Choose either New employment (for a new job) or Employment details (for an existing employer) Update your tax and super details as needed. Don’t forget your side gig If you’re earning income outside of employment (eg as a sole trader) you’ll need to pay tax yourself on that income. Consider setting aside a percentage for tax or using pay as you go (PAYG) instalments each time you are paid.
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