Saving on tax means big business savings when you work from home. If you’re interested in working out deductions and doing tax yourself, rather than going to an accountant or tax expert, or you simply want to get a better idea of the deductions you can claim when you work from home, there are numerous ways to save on tax in Australia when you work in a home-based business.
Records You’ll Need
When you work for yourself, life is often easier in many ways. You don’t have a boss looking over your shoulder, or colleagues arguing over the thermos when you’re trying to concentrate. You get full thermos control in your home office.
However, there is a time of the year when life is not so easy anymore when you work from home. Tax time. Of course, there are certain ways to make tax time work for you instead. This means being prepared throughout the year, rather than simply realising what date it is and running around like a headless chook, trying to get everything together at the last minute. A good way to do this is through the ATO myDeductions app that helps to keep a record of any deductions you can claim. Throughout the financial year, you’ll need to collect:
- All payment summaries – including employment or contractor funds and any government payments you receive.
- Bank statements – with all details of earnings and fees you have paid.
- Shares, unit trusts or managed funds statements – information on dividends and distributions, including any dividends you’ve reinvested which have to be declared as income.
- Buy and sell investment statements – to calculate capital gains and losses.
- Rental property records – any records pertaining to rental properties you manage.
- Foreign income – records of any foreign income.
- Private health insurance policy statement – in order to complete the private health section of your tax return.
- Receipts – to calculate deductions.
Tax Deductions You Can Claim as a Home Business Owner
In order to claim a deduction for any work-related expenses, you must have spent the money yourself and not been reimbursed, the sale must be directly related to earning your income and you are required to have proof of purchase. You can also only claim the proportion of expenses that relate to work, not private use. For example, if you bought a computer and use it for work half the time and for personal use the other half of the time, then you can only claim 50 percent of the computers cost on your tax. You can claim:
- Clothing, laundry and cleaning expenses – you are only able to claim the cost of a uniform if it includes your employer’s logo or is specific to your occupation, like safety gear or a chef’s hat.
- Vehicle and travel expenses – vehicle and travel expenses aren’t usually deducted when you work from home, but if you use your car for work and work in different locations then you may be able to claim a deduction on your travel expenses.
- Gifts and donations – any gift or donation to an organization endorsed by the ATO (as deductible gift recipients) can be deducted.
- Home office expenses – this is where you are able to claim a larger portion of deductions as a home business owner. Costs can include your computer, phone, electronic devices, and internet. Even furniture such as your desk bought used or new can be claimed, or your office bookshelf, office chair, etc.
- Interest, dividend and other investment income deductions – including interest, account fees, subscriptions, internet access, computer depreciation costs, etc.
- Self-education expenses – if you undertook any study relating to your job, you may be able to claim expenses, including course fees, student union fees, textbooks, stationery, home office equipment, etc.
- Tools and equipment – if you needed to purchase any tools or equipment to help you perform your job you can claim as a deduction for either the total or partial cost of the tool. Tools and equipment you can claim include, hats, sunglasses, sunscreen, safety equipment, and technical instruments.
- Other deductions – if you choose to see a professional to help manage your tax affairs, you can claim these costs on your tax. Other deductions include income protection insurance, union fees, overtime meals, personal super contributions and any other expense incurred in the course of earning your income.
- What Qualifies for a Home Office Tax Deduction?
- Tax Time: Check If You Qualify for Home Office Tax Deductions
- 5 Commonly Missed Tax Deductions for Small Business Owners
- Good Record Keeping for Your Small Business
- Non-Traditional Tax Deductions: Successes and Failures