Home Office expenses, FBT exempt vehicles & More
Home Office Expenses - Update
Do you claim home office costs using the fixed hourly rate? Recent changes have been announced by the ATO.
The Covid-19 special rate of 80 cents per hour has now been abolished. For the 2022-23 tax year (i.e. from 1 Jul 2022), there will be two methods available to claim home office costs:
- Revised fixed rate method
- Actual cost method
The revised fixed rate method has increased from 52 cents to 67 cents per hour and removes the requirement to have a dedicated home office space, which is great. However, phone and internet costs are now included in this rate and record-keeping requirements have tightened considerably.
What do you need to do right now?
From 1 March 2023 onwards, to use this method, you need to keep a record of the total number of hours you work from home for the entire time (e.g. timesheets, roster or diary) as well as evidence you paid for each of the expenses incurred that are covered by the fixed rate method (e.g. phone, internet, electricity bills). If you don’t have records, or if you don’t pay for these expenses yourself, you can no longer claim home office expenses under this method.
For the period 1 Jul 2022 to 28 Feb 2023, you can use a record which is representative of the hours you worked from home to calculate total hours for this period.
For more information, refer to PCG 2023/1.
The actual cost method is an alternative to the fixed rate method and is unchanged. It requires you to keep records of actual expenditure and actual work-related use. Apportioning for private use is often necessary.
Apportioning phone, data and internet can be tricky and work-related use is often grossly overstated by taxpayers, which is why these costs have now been incorporated into the fixed rate method above. For more information on substantiating phone and internet costs when using the actual cost method, see PSLA 2001/6 Verification approaches for electronic device usage expenses.
Update regarding exempt vehicles for Fringe Benefits Tax (FBT) purposes
It might come as a surprise to you that ‘exempt vehicles,’ such as utilities and work vans, are not automatically and absolutely exempt from FBT. The requirements regarding allowable private use are in fact quite strict.
I won’t go into great detail here but I will point you in the right direction. Click on this link for more information, or ask your friendly tax agent. It’s tempting to be ignorant, but the bliss won’t last long if you’re audited for FBT.
If you’re inclined to seek out detailed information for yourself, refer to Practical Compliance Guideline PCG 2018/3 and Tax Ruling TR 2007/12.
Note for partnerships and sole traders: FBT only applies in respect of your employees (if you have any), not for the business owners themselves. If you’re a sale trader with a commercial work vehicle with a load carrying capacity of less than 1 tonne, a log book may be required to support your tax claim for the vehicle. It’s best to seek advice specific to your circumstances.
Superannuation Guarantee Reminder
Most employers would be well aware of the cut-off date for payment of superannuation contributions for their employees: that is, super contributions must be received by the employee’s super fund by the 28th day after the end of each quarter.
Cash flow difficulties sometimes get in the way of better intentions and some businesses find themselves unable to pay their employee super contributions in time. In such a case, the law is specific and unyielding. A Superannuation Guarantee Charge (SGC) statement is required to be lodged within 28 dates of the quarterly super cut-off date and the shortfall amount, plus an administration fee and interest charge, is payable to the ATO. To add insult to injury, the Super Guarantee Charge is not tax deductible.
What happens if an SGC Statement isn’t lodged within 28 days?
If an employee reports you for unpaid super, or if the ATO conducts a Super Guarantee audit for any reason, you will be liable for the SGC, even if you ultimately paid the super contribution. In some cases, that might mean employee super needs to be paid twice – Ouch!
If an SGC statement isn’t lodged by the due date, a penalty of up to 200% of the shortfall amount can apply in addition to the SGC. If you are a company director, you can be personally liable for the company’s SGC under the Director Penalty regime. You don’t want to go down that path.
My advice to clients is to treat the payment of employee superannuation as a critical payment with the same importance and priority as paying staff wages. Paying superannuation monthly will smooth the impact on cashflow and an inadvertent late payment will have less consequence if it’s only one month of super rather than three months.
Now for something a bit more positive – Donations to charity
Charitable donations are a nice thing to do and it’s rewarding to get a little cash back on your tax return when you donate to a Deductible Gift Recipient.
But what if you don’t pay much tax in the first place?
If you don’t pay much tax, you will get less ‘bang for your buck’ from your tax-deductible donations. Or perhaps no ‘bang’ at all if you’re under the tax-free threshold. Here are some donation tips in the lead-up to end of financial year:
- If you and your partner share money, donate in the name of the partner who is on the higher tax bracket.
- If you own a company that won’t be taxable in the current year (e.g. due to losses), consider donating in your own name, using your own funds, rather than donating via the company.
- Donating to ‘GoFundMe’? Many of these crowdfunding campaigns are not Deductible Gift Recipients and cannot be claimed as a deduction in your tax return. That might be fine with you, but it’s good to know in advance, right? You can check a charity’s DGR status by checking the fine print or using ABN Lookup.
- You can elect to spread a donation over a period of up to 5 years, which can be very useful if your taxable income is not high enough to get best use from claiming a donation all at once.
- No receipts but you know you’ve donated to little things like school charity fundraisers and Salvation Army buckets? You can claim a maximum of $10 without receipts.
