Claiming Home Office Expenses: Post-Financial Year Considerations
As the end of the financial year has just passed, Australian business owners now need to turn their attention to a critical task: claiming home office expenses. With remote work continuing to shape the landscape of modern business, understanding how to navigate the ATO’s guidelines on home office deductions is crucial. In this guide, we explore the two methods recognised by the ATO to calculate your claim and maximise your tax deductions: the Fixed Rate Method and the Actual Cost Method.
Are you eligible to claim?
Before you put in the hard work to claim working from home expenses, you need to find out if you are eligible to make a claim. To be eligible, you must:
- Be working from home to fulfil your employment duties, i.e., not just answering occasional emails and phone calls.
- Incur additional expenses as a result of working from home.
- Keep records that show you incur the expenses.
1. The Fixed Rate Method
The Fixed Rate Method is a straightforward way to calculate your home office expenses. You can claim 67 cents per hour for every hour worked from home, covering additional expenses such as heating, cooling, lighting and internet or data expenses.
Advantages:
- Simplicity. Requires minimal record-keeping—just track your hours worked from home.
- Multiply your total hours worked from home by the applicable rate to determine your deduction.
Considerations:
- Ensure you have accurate records of your hours worked from home to support your claim. A log for the year must be kept of the hours worked.
- A separate system is required to claim expenses not covered by the fixed rate, such as the decline in value of depreciating assets (like home office furniture).
- This method is ideal for those who prefer a simplified approach to claiming home office expenses without the need for detailed expense tracking.
2. The Actual Cost Method
- Alternatively, the Actual Cost Method allows you to claim the actual expenses incurred while working from home. This includes:
- Utilities: Proportion of electricity and gas bills attributable to your home office.
- Internet and Phone: Costs related to work-related use of internet and phone services.
- Depreciation: Decline in value of home office equipment and furniture.
Advantages:
- Precision: Claim expenses based on actual costs incurred, potentially maximising your deduction if your home office expenses exceed the fixed rate.
- Flexibility: Suitable for those with higher-than-average home office expenses or specific equipment depreciation needs.
Considerations:
- Requires detailed record-keeping and documentation of all expenses claimed.
- Keep invoices, receipts, and records that clearly demonstrate the connection between expenses and your work activities.
Consult the experts
In order to ensure that you are maximising your tax return, consult an expert like Ascent Accountants. Our team offers a comprehensive suite of services that go beyond the scope of a traditional accountant role. We provide active partnership in your business journey.
Successfully preparing your home office expense claims post-financial year hinges on careful consideration and adherence to ATO guidelines. By selecting the appropriate method—whether Fixed Rate or Actual Cost—and partnering with seasoned professionals like Ascent Accountants, you ensure your claims are precise, compliant, and optimised for maximum tax benefits. Contact us today to explore how we can assist in achieving your financial objectives and steer your business towards continued growth and success.
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One of the most powerful decisions you can make with your superannuation is whether to run your own self-managed super fund (SMSF) and whether to invest in property through it. Most people know it's possible to use super to buy property. Far fewer know how to do it well. The following seven tips are designed to help you make the right decisions. 1. You Can Borrow Money to Purchase Property in Superannuation. Don't have enough in your SMSF to buy an investment property outright? Since 2008, superannuation held in a self-managed super fund can be used to borrow money for property purchase. This is done through a 'limited recourse loan' using a Bare Trust as the Custodian entity. You can't borrow the total value of the property—typically it's up to 80% for residential properties and 60% for commercial properties, with the required deposit held in the SMSF as security. The SMSF then makes the loan repayments, with rental income received by the fund and property expenses paid by the fund. Importantly, if there is a default on the loan, your other assets in the SMSF are generally protected from standard debt recovery and bankruptcy proceedings. The lender only has recourse to the property itself. Upon completion of the loan repayment, ownership of the property transfers legally to the SMSF. 2. Follow These 8 Steps to Set Up Your SMSF Setting up an SMSF properly can be a complex process. It’s best to set up an SMSF with the assistance of a qualified superannuation advisor, like us! We can assist with both the initial setup and the ongoing management of your fund. There are eight core steps to SMSF set up: Select the appropriate structure and name Sign the trust deed that covers how your SMSF is set up and run (it can have up to four members) Establish a trust for the SMSF by investing assets into the fund Register your SMSF with the ATO Set up a separate bank account for your fund Submit your tax file number (and those of any other trustees) Obtain an electronic service address to receive employer contributions into your fund (if applicable) Roll over funds from your existing superannuation account into your SMSF 3. Keep a Liquidity Buffer If you're buying property through superannuation, make sure you plan to keep a liquidity buffer of cash and/or shares in your fund. Lenders will check for this before lending to you—it should be at least 10% of the value you intend to borrow. But beyond satisfying the bank, it's simply good risk management. Property is an illiquid asset. Having accessible funds in the SMSF means you're not caught short if repairs are needed, the property sits vacant, or an unexpected expense arises. Because superannuation is central to most Australians' retirement security, the government has carefully regulated what can and can't be done with it. They don't want people gambling their retirement away on poor investments or incorrectly using their superannuation fund. 4. Use the Rental Income to Repay Your Loan You cannot live in the property you purchase through your SMSF until after retirement. Most people purchase an investment property and use the rental income generated to repay the loan—which makes excellent financial sense. The key is selecting a property that rents easily and delivers a strong rental return. Your purchasing criteria may look a little different to buying a home you'd live in yourself. For example, proximity to public transport, local amenities, and average rental rates in the area matter more than personal preference. 5. Get It Right and Enjoy Significant Tax Efficiencies One of the most compelling reasons to invest in property through superannuation is the tax efficiency on offer. These benefits can significantly improve the long-term return of a property investment compared to holding it in your own name. Key tax benefits include: No capital gains tax or tax no yearly investment earnings if under super caps. Salary sacrifice advantages if you're sacrificing salary payments into super, loan repayments are effectively tax deductible. Capped tax on investment income—the maximum rate of tax on income after expenses is 15%. Any capital gains on investments held for 12 months or more, is taxed at 10%. Standard investors outside super can pay up to 47%. 6. 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The key is understanding what you're getting yourself into: making informed decisions based on accurate data; keeping a diversified superannuation portfolio that doesn't place all your eggs in one basket; and not underestimating how complex buying property in superannuation can be. Sound Simple? It’s all in the details. If the above tips have made it sound straightforward, know that the detail is where the complexity lives. Getting professional advice from the start helps ensure you make the best possible decisions for your future. When selected according to rigorous property-purchasing criteria, property can be an excellent way to grow your superannuation and increase your chances of building a retirement fund that supports the lifestyle you want. Ready to Explore Property in Your SMSF? Whether you'd like to discuss whether an SMSF is right for you or need help setting one up, reach out to Ascent Accountants . If you want assistance managing the property within your fund, contact the Ascent Property Co team .
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