Home in on your tax

Now is the time to spend to reap tax benefits, writes

PEACE OF MIND: Shaun and Laura McCarthy with daughters, Madeline, 7 and Eliza, 5, wouldn’t be without landlord insurance. AS millions of Australians bring their work home, it’s creating opportunities for welcome tax deductions – and now is the time to spend.

Australian Bureau of Statistics data has shown that about half of the workforce uses the internet for home-based work, while several other studies have reported a rapid rise in home offices.

It’s estimated that at least one-third of Australians work regularly from home, and NDA Law managing director Andrea Michaels said this reflected changing work patterns and fewer traditional office jobs.

“It’s more work from home, subcontracting and consulting work,” she said.

This means greater potential for people to claim deductions for the work-related portion of energy costs, phone use, computers, internet connections, stationery, desks, chairs and other home office furniture.

Expenses paid in late June can become tax deductions from July, and small business owners can claim an immediate upfront deduction for any purchase below $20,000. Regular workers can claim instant deductions for purchases below $300, or write down the value of more expensive items over time.

“Unless they have their own small business at home and are working 40 hours a week in the home office, most people won’t keep the paperwork or diary entries to satisfy the ATO,” Ms Michaels said.

Many home office users might be safer using the ATO standard deduction of 45c per hour to cover heating, cooling, lighting and the decline in value of furniture, she said.

“The ATO is targeting mobile phones and internet use this year. They have seen a big spike in how much people are claiming.” People should also not claim for work-related items where their employer had reimbursed them, Ms Michaels said. “You can’t double dip.”

ATO assistant commissioner Kath Anderson said workers should remember that they could only claim the work-related component of expenses and depreciation.

“You need to exclude costs related to private use,” she said.

“You may be eligible to claim phone and internet usage where required by your employer. If you are claiming over $50, you’ll need more detailed records and possibly a diary to show your business use.

Lifetime Health Cover (LHC) – the government initiative designed to encourage people to take out hospital cover earlier in life – will hit those who fail to have hospital cover from July 1 after their 31st birthday.

Not having hospital cover can end up costing hundreds or even thousands of dollars if a person decides to take out hospital cover at a later stage, hitting them with a 2 per cent charge for each year they have failed to have it.

For example if you take out hospital cover at 40, you will pay 20 per cent more than a person who took out hospital cover at 30. The maximum loading is 70 per cent.

Comparethemarket spokeswoman Abigail Koch said it could be a costly decision down the track.

“The average price of health insurance (for a family of four) is about $4500 or $5000, if you are going to take out hospital insurance in your 60s you’re looking at an extra 70 per cent on top of that,’’ she said.

But the Medicare Levy Surcharge can also hit hard — this is a cost on Australian taxpayers who do not have an appropriate level of private hospital insurance and who earn above a certain income threshold: for singles, $90,000 per year, and couples $180,000.