WORKING FROM HOME

What You Need to Know for Your Accounting and Tax Obligations

Working from home has become a popular choice for many, offering flexibility, convenience, and a better work-life balance. But at Hills Accountants in Hobart, we know that when it comes to accounting, there’s more to working from home than just setting up a comfortable office space.

Understanding your tax obligations and entitlements can make a big difference to your end-of-year return, so here’s what you need to keep in mind as a freelancer, small business owner, or remote employee.

The Home Office Deduction

If you're working from home, you may be eligible to claim deductions for certain expenses. These could include electricity, internet, and even depreciation on your equipment. However, it's essential to understand the rules set by the Australian Tax Office (ATO) to ensure your claims are valid. The 'fixed rate' and 'actual cost' methods provide options depending on your circumstances.

Remember, the golden rule: any expense you claim must be directly related to earning your income, and you need to keep thorough records to substantiate your claims. Hills Accounting can guide you through these options and ensure you maximise your deductions while remaining compliant.

Tracking Expenses Effectively

It's crucial to separate personal expenses from work-related costs when working from home. For example, if you’re using the same internet service for both business and personal use, you’ll need to work out what percentage is business-related. Keeping detailed records and using dedicated accounting software can help simplify this process.

We recommend setting up a system to track expenses regularly, so you're not left scrambling at tax time. A good bookkeeping routine ensures you're always prepared, and with tools like Xero or MYOB, managing your home office deductions becomes a much more streamlined process.

Working from Home and GST

If you’re running a business from home and registered for GST, understanding how GST applies to your home office expenses is important. You can generally claim a portion of GST on expenses such as electricity and internet, but it's essential to get the percentages right to avoid under- or over-claiming. GST rules can be tricky, and that's where Hills Accounting steps in to help you navigate this aspect.

The Importance of a Separate Business Space

The ATO pays close attention to whether you have a dedicated workspace in your home. If you're claiming a portion of rent, mortgage interest, or other property-related expenses, you’ll need a clearly defined area that is set aside for work. A spare room or converted garage can qualify, but a corner of the kitchen table may not.

At Hills Accountants in Hobart, we’ll ensure you’re aware of these rules and help you make claims in the most tax-efficient way possible.

Employee Tax Deductions

If you're an employee working from home, there are still tax considerations. The ATO’s fixed rate method, which recently changed, allows you to claim 67 cents per hour for all home office expenses, covering items like power, internet, and even a portion of your phone use.

However, you must keep a log of the hours worked from home and receipts for expenses such as office furniture or computer equipment. For detailed advice and record-keeping tips, our team at Hills Accounting can make sure you don’t miss out on valuable deductions.

Staying on Top of Super and PAYG

Small business owners, freelancers, and contractors must also remember their superannuation and PAYG withholding obligations when working from home. It’s easy to overlook these when you’re not in a traditional office environment, but they’re just as important.

How Hills Accounting Can Help

We help business owners, freelancers, and employees make the most of their home office arrangements. From understanding your tax entitlements to ensuring your deductions are valid, our team is here to provide personalised advice and help you stay on top of your finances.

Contact Hills Accounting Hobart for a consultation today at [email protected] or call us on 03 62737800 and let’s ensure that working from home continues to work for you – both personally and financially.

Remember, this article is general in nature and doesn’t take into account your specific objectives, financial situation, or needs. For advice tailored to your circumstances, have a chat with us at Hills Accounting Hobart.