Working From Home Tax Deductions Explained

Working from home tax deductions explained

The rise of remote working has seen more and more employees switch to working from home. For many Aussie tax payers, this opens up an entire new realm of home office tax deductions. At National Accounts, we’re your trusted tax specialists, here to ensure you’re not paying more tax than you need to. We’ve rounded up all the tax deductions you can claim for working from home in the 19/20

Home office equipment deduction

Working from home often requires you to have an office set up, and that can be costly. From office chairs to laptops and printers, you’re entitled to deduct a portion of your costs. You can claim the full amount of these items if they’re under $300, or the decline in value on items over $300.

Home office utilities deduction

You’re also eligible to claim a portion of the utilities (lighting, heating, cooling) used while working from home. You can either claim these expenses using the fixed cost method (52c per hour for the 19/20 tax year), or you can calculate your actual expenses using the actual cost method.

 For the fixed cost method, you’ll need to keep a record of the hours you’ve worked from home throughout the year, or a diary of a four-week representative period of your working pattern.

 For the actual cost method, you’ll need to work out the actual cost per hour worked and the number of units used for heating, cooling and lighting.

Phone and internet work from home deduction

Employees who work from home can also claim a portion of their phone and internet costs, providing you have paid for them yourself and have reasonable evidence to substantiate their claim.

For claims over $50 in total, you’ll need to reasonably establish the percentage of your phone and internet costs that were for work and personal use. You may then deduct the work related percentage from each bill, ensuring you retain records to back up your claims.

Work from home occupancy deductions

Generally, employees are not eligible to claim a portion of their rent or mortgage expenses for their workspace, except in either of the two scenarios:

  no other place of work is provided by your employer and you are required to dedicate a space to that employer’s business

  the space in the home is of a business nature and is not suitable for domestic use

Working from home tax deductions as a result of COVID-19

Employees who are temporarily working from home as a result of the COVID-19 pandemic have the option to use the new shortcut method of deducting 80c per hour they work at home, to cover all their working from home expenses.

If you’re working from home due to COVID-19, you can choose the above-mentioned shortcut method, or you can choose to use the standard fixed costs or actual cost methods available all year round.

The 19/20 tax year is set to be one of the most complex years for tax returns, with more employees than ever claiming home office tax deductions. At National Accounts, we’re committed to supporting you through your tax return, ensuring every expense you incurred is accurately accounted for. Reach out today for assistance filing your 2020 tax return and claiming those all important working from home tax deductions.

By | 2020-04-30T16:43:39+09:30 April 29th, 2020|Uncategorized|0 Comments

Capital Gains Tax and Investment Properties

How to avoid capital gains tax on your investment property

One of our key focuses at National Accounts is to help you maximise the tax benefits you’ll receive on your investment property. Among other things, you can get hit for capital gains tax if you turn a profit on your sold property.

To help you minimise or even completely avoid paying capital gains tax on your investment property, we’ve put together a few key strategies for you to implement this tax year.

First, what is capital gains tax?

If a capital asset is sold and makes a profit, it attracts capital gains tax (CGT) – this applies to real estate, shares and even cryptocurrency. So when it comes to your investment property, there are a few things you should be aware of.

The CGT you’ll pay is seen as additional income, just like your salary. It’s calculated according to your tax bracket, which you can find out via the Australian Tax Office(ATO). There are different rates depending on your citizenship and yearly earnings.

When do you have to pay it?

You’ll pay your CGT at the end of the fiscal year when you do your tax return, in the same year you sold your property (the date you signed the contract for sale). So if you sold your investment property in August 2019, you’ll pay CGT in July 2020.

It can be a large amount of money, especially if you’re in a higher tax bracket, but there are things you can do to reduce or even avoid paying capital gains tax on your investment property this year.

To help reduce your tax bill, use these 4 strategies.

There are quite a few exemptions and concessions for capital gains tax, but here are our top 4 strategies when it comes to your investment property.

1. Be an owner-occupier

If the property you’re selling is your main residence, you won’t have to pay CGT. However, if you’ve made money from your investment property, a certain proportion of it will be subject to capital gains tax.

2. Take advantage of the temporary absence rule

If you move out of your home, you can still keep it as your main residence indefinitely, or up to six years if you later decide to rent it out. The time period also resets back to six years if you then move back in.

3. Get a valuer to reassess your property before you rent it out

Capital gains tax is the dollar figure amount that’s the difference between your investment property’s value when it was rented out and the price it’s sold for. It’s important to get a license valuer out so there’s no surprises down the track when it comes to your tax bill.

The same applies to capital loss, too. If you lose money when your property is sold, you can use a capital loss to offset a future gain. However, you can’t use capital loss for other types of income.

4. Don’t sell your investment property for at least 12 months

Did you know that you’re eligible for a 50% tax discount on CGT if you’ve owned your investment property for at least a year? If you’re thinking of selling, make sure you do your own research and keep a hold of your property so you can make the most of these kinds of tax benefits.

Whatever your situation, we’re here to offer professional advice

At National Accounts, we know the ins and outs of tax and investment properties, so you can get back to doing what you love most. Our personalised advice can help put you on track when it comes to your finances and our friendly team are just a phone call away!

By | 2020-04-29T14:11:11+09:30 April 29th, 2020|Uncategorized|0 Comments

The Pros And Cons Of Accessing Your Superannuation Early

The Pros And Cons Of Accessing Your Superannuation Early

Generally speaking, superannuation in Australia must not be accessed until you reach your applicable preservation age and retire from the workforce. That said, there are certain circumstances that permit you to access funds from your superannuation early. In this guide, we’re unpacking the pros and cons of accessing your superannuation early, and what the implications may be if you choose to do so.

When can you access your superannuation early?

There are certain instances in which you are permitted to access your superannuation early. These include compassionate grounds, financial hardship, terminal illness and incapacity. If you are not terminally ill or out of work due to disability, early access to your superannuation will likely only be granted if it prevents the sale of your home or other debt enforcement action on unpaid bills.

New legislation in 2020 also permits eligible applicants to release up to $20,000 of their superannuation over the next two years if their income has been impacted by the COVID-19 pandemic. You’re eligible if you’ve been made redundant, your employment income has been cut by more than 20%, or you’re a sole trader who has suffered losses in turnover of at least 20%.

What are the disadvantages of accessing your superannuation early?

Accessing your superannuation early might sound like an easy way to access money without going into debt. While true, there are some significant downsides to doing so. Consider the impact that the funds from your superannuation would have on your circumstances, and consider whether it’s worth sacrificing potential compounding returns by leaving it in your super.

Your superannuation is invested with long term returns in mind, so while you may withdraw $10,000 now, you could be losing out on much more had you left that money to continue growing in your super fund.

This is particularly important if you’re accessing your super fund to pay mortgage arrears or other debts. If the amount you access can’t fully pay off the debt, you may still end up in danger of having your home repossessed or defaulting on debt repayments – but you’ll still have missed out on the potential returns from your superfund. In addition, funds within your superannuation are protected from creditors. If you withdraw it, you lose this protection.

Accessing your superannuation early can also mean paying higher rates of tax, plus fees from your superfund provider.

What are the advantages of accessing your superannuation early?

Accessing your superannuation early may relieve extreme financial stressors of debt, medical expenses, funeral costs or legal costs. Withdrawing from your superfund would allow you to pay these bills without taking out additional credit.

Withdrawing your superannuation early can also allow you to enjoy time with friends and family if you have been diagnosed with a terminal illness, or help with the financial aspects of temporary or permanent incapacitation.

Accessing your superannuation early due to financial hardship

The main advantage of accessing your superannuation early is to combat financial hardship. If you have exhausted all other options for paying your creditors and are experiencing emotional stressors relating to your bills, accessing your superannuation early can provide relief – but only if it solves the problem entirely.

If the amount you can withdraw from your superfund does not cover the entire debt, you’re simply prolonging eventual debt enforcement action. This leaves you with less in your superfund for retirement and/or another incident of financial hardship.

 It’s important that you weigh up the short term benefit and the long term disadvantages of accessing your superannuation early due to financial hardship.

By | 2020-04-29T14:33:38+09:30 April 29th, 2020|Uncategorized|0 Comments