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What You Need To Know About Working From Home When It Comes To Tax

If you have been in a situation with your employment where you have been forced to work from home, your taxable deductions could be different to a normal working year. Lockdowns, a hybridisation in work practices and increased flexibility due to newer technologies on where we’re now able to work, now mean that careful consideration and due diligence needs to be put into practice when it comes to the tax returns.

When it comes to working from home, occupancy expenses cannot be claimed by employees. These can include rent, mortgage interest, water and rates. They also are not able to claim the costs for various expenses, including

  • Coffee, tea, milk and other general household items your employer may otherwise have provided you with at work
  • Those that are related to children and their education – this includes setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
  • Expenses that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone.

The best way to ensure that you are receiving the best possible deductions for your tax returns and claiming the right items is to start a conversation with us, your registered tax agents.

Choosing A Calculation Method

If you’re an employee who works from home, you may be able to claim a deduction for expenses you incur relating to that work. These can be additional running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses.

There are special rules that may be applicable if your home is your primary place of business though that you may need to consider.

There are three methods to calculate home office expenses depending on your circumstances:

You can use the method or methods that will give you the best outcome. But you need to make sure that you maintain accurate records and fit the criteria for the method/s used.

For the 2019–20 income year, if you worked from home before 1 March 2020, you may need to use more than one of the three methods to work out your total deduction for the year.

Again, to ensure that you maximise the deductions allowable from your claims, the best practice is to consult your tax adviser. Starting a conversation with us could be your key to a better tax return this year.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

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David and Alison Parker

I have been consulting J L Noller and Co. (more specifically Jane) for six years and during this time I have found her to be professional, efficient and easy to discuss all accounting and taxation matters with. Her office team are all polite and friendly also.

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Carl Gillmore

I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

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Carl Gillmore Landscape

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier