Small business owners & remote workers: What the home office expense ATO crackdown means to you

Increasing numbers of Australians are working from home or running their small business from there.

This often incurs costs that you may be able to deduct in your annual tax return.

However, be careful with this: a home office expense crackdown by the Australian Taxation Office (ATO) means additional scrutiny will be exercised over home office deductions. This is to identify incorrect claims, which will be disallowed.

To claim a home office expense from the ATO, three conditions must be met. These are discussed below.

Home office expense ATO crackdown: The 3 conditions you must meet…

1. You must have spent the money


Quite simply, you must have incurred an expense.


For example, if you hire a cleaner to maintain your home office, you have incurred an expense. You may be able to claim the cost of those cleaning services. If you choose not to hire a cleaner, you cannot make a claim for the hours that you spent cleaning your home office.


If you’re a remote worker, sometimes employers will reimburse you for additional costs that you incur when working from home.


Once you’ve been reimbursed, the ATO’s view is that you did not spend the money. The money was instead spent by the person who reimbursed you.


So, if you spent $50 to hire a cleaner and your employers pay you back for this, you cannot claim it.

 

2. Money spent must relate to making an income


To claim a home office expense deduction from the ATO, the money must have been spent in relation to the income you earn.


You cannot buy a television for watching personal shows, place it in your home office and then claim it because the television does not enable you to earn income.

Additionally, where you incur a cost that is partially for business purposes and partially for personal uses, such as your mobile phone bill, you can only claim the business-related portion.

 

3. You must keep a record of your expenses


If the ATO audits your tax return, you must be able to provide a record, such as the tax invoice, to prove that you paid for all items claimed.


Small business accountants recommend that you keep your tax records for seven years.

 

For a reliable accounting firm based in Perth, or for assistance in completing your 2018 income tax return, contact Ascent Accountants.


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