If you are an employee and you sometimes work from home, you may be able to claim deductions for some of the expenses you incur, provided you are not reimbursed by your employer. Here, we consider two common types of expenses that employees may claim and how you must substantiate your deductions.

Running expenses such as heating, cooling and lighting costs are only deductible if you exclusively use these services while performing work at home. For example, the ATO says that you would not be able to claim deductions for these expenses if you work on your laptop while sitting next to your partner who is watching TV.

However, if you perform work in a room when others are not present, or in a separate room dedicated to work activities, you may be able to claim some running expenses.

In practice the ATO accepts two methods for calculating your deduction: either a simple rate of 52 cents per hour worked (effective from 1 July 2018), which covers all the running expenses you can claim, or you can claim the work-related proportion of actual expenses incurred by maintaining thorough records and evidence. This is a more complex method, requiring advice for taxpayers who would be entitled to claim more than the 52 cents per hour rate would allow.

You can claim up to $50 in total for all work-related device usage charges (phone calls, text messages and internet) with basic documentation only. However, if you need to deduct more than $50, you must maintain detailed written evidence to substantiate the work-related proportion of your expenses.

Deductions for electronic devices are calculated separately. If you purchase these items to help you earn income, you may be entitled to an immediate deduction for items costing $300 or less, or a deduction for decline in value for more expensive items.

Occupancy expenses such as rent, mortgage interest, council and water rates, land taxes and insurance premiums are usually not deductible for employees who work from home.

The ATO also says that casual employees cannot claim deductions for telephone rental expenses, as they are not considered to be “at call”.

If you work from home as an employee, talk to us today to check whether you are claiming all the expenses you are entitled to. We can also help you ensure that you are keeping adequate records and evidence to protect you in the event of an ATO audit.

Victims of the recent natural disasters beware, there is an SMS scam circulating that purports to give you “an 8% bonus” on your 2020 tax return. The scam urges victims to start the process by filling out a form and provides a link to a what looks like the genuine myGov website. According to the ATO, this website is fake and this scam is a classic case of scammers impersonating the ATO in an effort to collect personal information including names, birth dates, addresses, emails, phone numbers and online banking login details.

Once this information is obtained, scammers can use it to commit identify theft, including porting your phone, accessing your bank account, obtaining a loan in your name, lodge tax returns, steal your superannuation, commit other types of fraud or they could on sell the information to others to commit these offences.

The ATO notes that over the past few years, it has seen an increasing number of reports of scammers contacting members of the public pretending to be from the ATO by SMS, email and phone. The scams are also becoming more sophisticated, such as the use of software to imitate ATO phone numbers, and the use of a three-way conversation between the scammer, the victim and another scammer impersonating the victim’s tax agent.

If you receive a call from someone saying they are from the ATO but aren’t sure, the best course of action is to hang up and call the ATO back on the appropriate number listed on its website, or call your tax agent on their listed number to seek advice. While the ATO does send SMS, emails and calls taxpayers, remember, the ATO would never:

send an SMS or email asking you to click on a hyperlink to log into myGov or other government websites;

ask for personal identifying information in order to receive a refund;

use aggressive or rude behaviour, or threaten you with immediate arrest, jail or deportation;

project its number onto caller ID;

request a payment of a debt via cardless cash, iTunes or Google Play cards, pre-paid Visa cards, cryptocurrency, or direct credit to a personal bank account.

If you’ve fallen victim to this or other tax-related scams, there’s no shame, with increasingly sophisticated scams in play, last year over 15,000 people reported to the ATO that they provided scammers with their personal identifying information. The sooner you notify the ATO, the better the outcome.

Following on from the Federal government’s $17.6bn stimulus package unveiled last week for the coronavirus (COVID-19), some State governments have announced various concessions to support businesses and keep the local economy moving during this difficult and uncertain time:

• NSW – businesses with payrolls of up to $10m will have their payroll tax waived for 3-months. In addition, the government will l also seek to bring forward the next round of payroll tax cuts by raising the threshold limit to $1m starting the 2020-21 financial year. For small businesses including bars, cafes, restaurants and tradies, the government will waive a range of fees and charges.
• Queensland – a new $500m concessional loan facility will be available and comprise of loans of up to $250,000 with an initial interest-free period for businesses to retain stuff. In addition, payroll tax deferral of 6-months will be extended to all affected businesses across the state.
• Western Australia – household fees and charges will be frozen until at least 1 July 2021 (including electricity, water, motor vehicle charges, emergency services levy, and public transport fares). The energy assistance payment will be increased to $600 for eligible concession cardholders including pensioners. Small to medium businesses with a payroll between $1m and $4m will receive a one-off grant of $17,500 and the payroll tax threshold increase to $1m will also be brought forward to 1 July 2020. In addition, affected employers that pay $7.5m or less in Australian Taxable Wages can also apply to defer payment of their 2019-20 payroll tax until 21 July 2020.
• Tasmania – small businesses in the hospitality, tourism, seafood and exports sectors with a turnover of less than $5m will have access to interest-free loans for the purpose of purchasing equipment or restructuring business operations. Payroll tax will be waived for this financial year for hospitality, tourism and seafood industry businesses. Other affected small to medium businesses with an annual payroll of up to $5m in Australian Wages can also apply to have their payroll tax payment waived. A youth employment payroll tax rebate scheme will be implemented from 1 April 2020 and a one-off $5,000 grant will be provided to businesses that hire an apprentice or trainee. There will also be emergency relief payments to individuals and families as well as various other grants and measures to help the tourism sector, communities, front line workers, and metal health organisations.

A recent interview with Tax Commissioner Chris Jordan revealed details of what the ATO will be paying particular attention to this year. Perhaps not surprising, but the ATO will be targeting businesses that deal in cash. As a part of its cash and hidden economy operation, the ATO has compiled “data-maps” of cash-only businesses and those that do not frequently or readily use electronic payment facilities.

Using the data-maps the ATO is homing in on particular suburbs which have a high incidence of cash-only businesses. In Sydney, Cabramatta and Haymarket were cited as examples of areas that the ATO visited in relation to its operation. According to the Commissioner:

“People say to me: ‘it’s terrible – people steal the money, you’ve got to count it, you’ve got to reconcile it, you’ve got to have security around it, you’ve got to take it to the bank’ … There’s no compelling business reason to have cash only.”

With these cash and hidden economy visits the ATO is conducting, it is looking for several things: whether the business has undeclared income; whether the employees are allowed to work (visits in the past have been made in conjunction with the Fair Work Commission or the Department of Immigration); and whether the employees are receiving the correct amount of wages, conditions and superannuation.

Even if you’re not running what the ATO deems to be a “cash business” there are other areas you will still need to be aware of this tax time. In particular, the ATO will be looking at small businesses wrongly claiming private expenses, and unexplained wealth or lifestyle.

Under tax law, you can generally deduct a business expense if it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income, provided the expense is not capital, private or domestic. Commissioner Jordan noted that small businesses intermingling their private expenses with their business expenses have been an issue for a long time, but this year he has decided to “renew the discussion to highlight that we are going to be focusing on these areas”. Hence if you’re running a small business you should make sure all your expense claims are in fact business related, any expenses that are both business and personal needs to be apportioned on a reasonable basis.

The unexplained wealth or lifestyle targeted by the ATO includes instances of business owning families that have low or average reported incomes, but have a lifestyle that far exceed those modest incomes. Commissioner Jordan considers that having kids in private schools and taking frequent business class flights on overseas trips would be considered to be unexplained wealth. He said the ATO will use all its resources including obtaining information from other government departments (ie Department of Immigration) and social media (ie Facebook posts).

Have you tried to contact the ATO and were unable to get through to speak to an officer or was outright blocked? Well, you’re not alone, according to the latest figures released (year to date 31 December 2019), the ATO failed at its target of answering 80% of general calls within 5 minutes, while blocking almost 500,000 calls.

For the year to 31 December 2019, the ATO answered a total of around 3.7m calls within the 5-minute target. 252,196 calls, almost 7%, were abandoned, and 491,186 calls, almost 13% were blocked. During tax time, a total of around 3m calls were answered within the 5-minute target. 207,741 calls, around 6%, were abandoned, and 485,348, or 16% of calls were blocked. According to the ATO, it blocks calls from “entering the ATO environment” when inbound calls are expected to significantly exceed its capacity.

While the ATO says blocking calls minimises the risk of taxpayers queuing for excessively long periods of time then subsequently abandoning the call without receiving service, it is cold comfort for those whose calls were blocked. It is unknown how long calls are being blocked during these peak periods as the ATO does not provide data on this measure, but this should be of particular concern for taxpayers in areas with unstable or poor phone reception and those who are calling during busier times such as after a natural disaster or during tax time.

For the prior year (2018-19), the ATO met and exceeded their target with 81% of calls answered within 5 minutes and goes up to 87% during tax time. Almost 6m calls were answered by the ATO in that year with only 6% of calls abandoned (384,648) and 6% (372,270) calls blocked. Just in relation to tax time, around 2.5m calls were answered, with 5% (133,816) calls abandoned and 2% (56,292) calls blocked.

Looking at the data, there appears to be a worrying increase in the percentage of calls being blocked from 2018-19 to 2019-20 during both tax time (2% vs 16%) and over the year (6% vs 13%), however, the effect is much more pronounced during tax time. While the ATO does not provide a cause as to why more calls are being blocked, it could be a combination of more calls to the ATO and static staffing levels.

If you’ve been blocked, or are unable to reach the ATO, contact us. According to ATO data, 90% of tax practitioner calls were answered within 2 minutes and zero calls were blocked. We can help you get through to the ATO and get the answers you’re looking for.