Management

How savvy business leaders can best utilise freelancers and avoid miscalculations

By Jonathan Perumal >>

ECONOMIC PRESSURES and fears of global financial instability are leading many Australian businesses to implement hiring freezes or lay off significant numbers of staff. This trend is particularly visible among technology companies and start-ups as they scale back previous growth forecasts.

In this uncertain environment, companies need to remain agile and effectively utilise all the resources available to them to remain competitive. One way to do this is by bringing in freelance workers, also referred to as independent contractors, rather than hiring new full-time staff. 

There are 1.1 million independent contractors in Australia, comprising more than eight percent of the employed population, according to recent ABS data on working arrangements.

Companies can tap into this local talent pool, or bring in international freelancers, to supplement skills gaps, for extra support during certain phases of the business cycle, and to execute specific projects.

But in doing so, it is important for businesses to understand the risks of misclassification, which can result in substantial penalties.

Freelancers bring independence, flexibility, cost savings to a business

Freelancers can provide benefits that businesses may not get with existing employees. They are typically highly skilled individuals with deep expertise in their respective fields. Working with a variety of clients can also give them a greater breadth of experience than employees who work for a single company.

Freelancers typically use their own tools to complete work, meaning there is less reliance on company resources. They also retain a degree of control and independence in doing so, meaning that businesses that hire them can focus on the deliverables, not the steps taken to get there or the time they allocate to the task.

As freelancers usually don’t require, or expect, much oversight in their work from clients when completing projects, management and administration teams can spend less time managing a freelancer’s workload. These teams can direct their energy to other tasks, like developing company strategy and longer-term goals.

Businesses can bring in and let go of freelancers as their needs change, without the obligation to provide the overhead associated with a full-time employee. Companies are also not required to make employer tax liability payments because freelancers are self-employed.

For these reasons, it can be more cost-effective to work with a freelancer as opposed to an employee – under the right circumstances.

Freelance workers can be an asset to businesses that are looking to supplement their internal resources or complete certain projects during times of economic strain. However, without a solid understanding of regulations governing the use of independent contractors, coupled with robust plans outlining the work they are tasked to do, the risk of misclassification and ensuing penalties is significant.

Understanding misclassification risks and remaining compliant

In 2018, Foodora Australia admitted to owing their thousands of food delivery drivers over $7.5 million in wages and superannuation, an underpayment that resulted from misclassifying them as independent contractors instead of employees.

The penalties involved with contractor misclassification are costly, with Australian companies liable to a $63,000 fine per violation, as outlined by the Independent Contractors Act 2006 in conjunction with the Fair Work Act 2009.

Since freelancers are responsible for their own employment taxes, social and health benefits, government regulations are in place to protect them in an employment relationship. For example, in certain circumstances, which are outlined by the Australian Taxation Office, businesses must pay superannuation for contractors who are considered employees for superannuation purposes.

To ensure your business is fully compliant with local laws when hiring a freelancer, keep these five ideas in mind:

  1. Prepare in advance for an audit - Conduct regular audits to determine how freelancers are being used within a company. Ensure there is a standardised process for managing contractors and their agreements, including comprehensive recordkeeping and payment transaction logging, which are beneficial to have on-hand and ready-to-go in the case of an audit.
  1. Understand international employment laws - Companies that take a global approach to their search for talented freelancers who may not be found as easily in the local region should understand what international employment laws determine the criteria for engaging freelancers, as they are often complex and can differ greatly country-to-country.
  1. Align the legal requirements with what you’re engaging the freelancer to do - Remember that for most independent contractors, they are not beholden to meetings, time ‘on the clock’ or other behaviour that a full-time or part-time employee engages in. Most often, the work requirements are aligned with project-based work versus continuing contribution to the company goals.
  1. Do not roll your freelancer into your day-to-day operations - Whether this is attempting to determine work hours or location or adding them to any platform or system that is used to manage employees.
  1. Ensure you have protection agreements in place - IP agreements, NDAs, and data protection agreements will protect your organisation, clients and the worker from any conflicts or confusion about the work relationship down the road.

Freelancers can be a great resource for businesses to fill skills gaps or complete projects, but it is vital to be aware of and actively manage the risks associated with misclassification when utilising the gig economy.

 

ABOUT THE AUTHOR:

Jonathan Perumal is the Australia-New Zealand (ANZ) region country manager at Safeguard Global, helping ANZ companies hire talent anywhere in the world, fast and compliantly. Mr Perumal has worked for a several fast-growth tech companies including Salesforce, Success Factors, OneLogin, Workday, and Q-CTRL over the past two decades and joined Safeguard Global last year following its expansion into ANZ. He has a proven track record of driving revenue and building strong team, client, and business partner relationships and has worked with cross functional units to drive business improvement through system optimisation and sales process improvement.

www.safeguardglobal.com

 

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Small business owners 'age up'

AUSTRALIA's small business owners are rapidly getting older as the proportion of younger entrepreneurs shrinks, according to research from the Australian Small Business and Family Enterprise Ombudsman.

Ombudsman Bruce Billson said the most common age of small business owners across Australia is 50 years, compared with 45 years in 2006.

“In the 1980s there were actually twice as many small business owners aged between 30 and 49 as there were aged over 50,” Mr Billson said.

“The Intergenerational Report being released by the (Federal) Treasurer (Jim chalmers) this week highlights the ageing of the population and the quest to make our economy larger to meet the challenges and opportunities of the future. 

“Small business, which accounts for 97 percent of all businesses and provides jobs for over 5.1 million people and employs 42 percent of all apprentices and trainees, stands at the epicentre of this mission and energising enterprise will help deliver the growth to meet future needs," Mr Billson said.

“But the small business sector faces its own demographic challenges with only 8 percent of small business owners aged under 30. It is half the peak for this age group of 17 percent achieved in the mid-1970s.”

Mr Billson said in some sectors it was even lower, such as retail where only 6 percent of small business owners are today aged under 30.

“We need to replenish and nurture the next generation of entrepreneurs, value self-employment and encourage and enable smaller enterprises and the livelihoods they make possible,” Mr Billson said.

“We need to understand why it is not as appealing as it perhaps should be for younger Australians to own a small business?”

More than one in five small business owners (22 percent) are aged 60 and over.

In agriculture, forestry and fishing two-thirds of small businesses are owned by people over the age of 50.

Other sectors where more than 50 percent of small business owners are aged 50 or over include manufacturing, retail, finance and insurance, real estate, wholesale trade, utilities and waste services.

www.asbfeo.gov.au

 

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Power business 101: Lower electricity costs with fewer emissions

By Leon Gettler, Talking Business >>

IMAGINE getting a cheaper electricity bill in a plan that reduces environmental pollution, giving off fewer greenhouse gas emissions.

That’s the promise of EnergyIQ, an energy switching site for those looking for renewable energy options.

It’s an attractive proposition, with some customers shocked after being told that they'll be hit with a massive hike to their electricity rates next month – some facing increases of up to 83 percent.

Energy IQ operates on the eastern seaboard from South Australia up to Queensland. Western Australia, Tasmania and Northern Territory aren’t competitive as they have only one power supplier. 

Ross Sharman, the founder and CEO of EnergyIQ in Australia, said it made sense for consumers and households now battling rising energy prices to switch.

Power change made easy

Mr Sharman said Energy IQ allowed households and energy users to upload bills and switch to a cheaper provider – and they can do it digitally in a few seconds without having to go through a call centre

“We provide that service to banks and governments. We have our own consumer facing service that is basically a market place for more renewable focused energy retailers to help consumers switch to more renewable energy,” Mr Sharman told Talking Business.

He said energy costs would keep going up.

“It’s going to get more expensive, so being on a cheaper plan – but ideally on a plan that pollutes the environment less – is a good choice for consumers to make,” Mr Sharman said.

He said the energy sector was one of the biggest polluters in Australia at the moment, “mainly through coal”.

“Those coal power stations have life cycles of 10 to 15 years left and there’s a transition away from coal that’s going to happen, because solar and wind are now cheaper than the dark stuff,” he said.

“We’re just trying to help to expedite that shift away.”

Businesses must consider emissions now

Mr Sharman said Australian corporates were now addressing greenhouse gas issues.

“Big corporates now have a social responsibility and that goes all the way up to banks,” he said.

“They literally have to report on their activities to reduce their climate impact.

“Big businesses are doing this now, so home owner or consumers care more than they did in the past. Small businesses really have a duty to try and do the right thing as well. They’ve got a choice. It’s not going to cost them extra, which it shouldn’t do, then shifting to renewable resources is a good thing.”

Mr Sharman said households that changed their energy provider to one that uses renewable energy were, in effect, making that choice away from coal.

He said Australians had become more aware of climate change and greenhouse gases because of storms and bushfires.

Mr Sharman said gas will be an important “part of the mix” as Australians move to renewables, but its importance will decrease over time.

“It’s really going to be the next five years or 10 years that it will play a role,” he said. “After that it will become negligible.”

As an example, he cited South Australia which was running almost 100 percent renewables. There is no coal and it uses some gas.

“It uses gas but it’s realty about balancing the assets and using gas to fill that void,” Mr Sharman said.

www.leongettler.com 

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness.

https://play.acast.com/s/talkingbusiness/talking-business21-interview-with-ross-sharman-from-energyi

 

   

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Forget Return on Equity … focus upon Return on Effort

By Leon Gettler, Talking Business >>

WHAT ARE some of the rules that entrepreneurs and small-to-medium enterprises (SMEs) have to follow to grow their businesses?

Former scientist turned business consultant and coach, Tom Williams said successful entrepreneurs needed focused management practices and to block out time for strategic planning.

It’s a formula that helps any SME owner to scale their business and overcome any barriers to growth, according to Mr Williams, whose business is branded InnovationConsult. 

Mr Williams said while a lot of entrepreneurs focus on RoE (Return on Equity) he urges his clients to plot a different form of ROE. It’s Return on Effort.

“I encourage my clients to plot the profit contribution of different categories of clients with the effort it takes for the organisation to serve those clients and look for a group of ideal clients that are not only profitable but are pleasant to work with and don’t excessively take up a lot of time and effort,” Mr Williams told Talking Business.

“Once you’ve identified those clients, then it’s a matter of thinking about where you can reach them, how can you reach them and primarily with outbound marketing. You can use things like Sales Navigator to identify where these people are, how to reach them and begin a conversation with them and set up a pipeline that allows you to predictably, reliably, and repeatedly get $5 to $3 back for every $1 you invest in finding these targets and converting them to clients.”

Springboards for growth

Mr Williams said entrepreneurs needed five springboards for growth.

These are: having a value proposition, having a vision of where the business will be in the future, hiring quality people and leaders, having good process and systems and having a sales and marketing machine that drives profits instead of costs.

Mr Williams said employer branding and values are critical for recruiting and retaining quality staff.

He said many employers “hadn’t thought this through”.

“If you’re young and talented, why would you want to work with a particular organisation?” he said. “You’ve got to think through what you’re providing so you become the employer of choice.

“Often the younger generation wants a social purpose beyond just making money that they can believe in. They want to have some fun in the organisation, they want to believe they’re going to be working with people they enjoy working with, of course, they want good remuneration and they want career prospects.

“But it’s the total package of believing in the organisation, sustainability, ESG (environmental, social and governance) is coming into it more and more. It’s the total package to be the employer of choice.”

Total value proposition

Mr Williams said entrepreneurs needed to develop a total value proposition for clients, giving their customers “the emotional payoff”.

He said entrepreneurs should also develop systems and processes to ensure their business runs like clockwork.

Some of this, he said, came down to having quality software providing CRMs (customer relationship management systems) and ERPs (enterprise resource planning systems).

This came down to a lot of work – “something no entrepreneur can avoid”.

“Work-life balance is something that’s obtainable down the track a bit – but in the early stage, your work has to be your life in order to be successful,” Mr Williams said.

www.innovationconsult.com.au 

www.leongettler.com

 

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness.

https://play.acast.com/s/talkingbusiness/talking-business-26-interview-with-tom-williams-from-innovat

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ASBFEO points out important taxation changes for 2023-24

NEW instant asset write-off thresholds, updated tax rules, increased superannuation payments and a rise in the minimum wage are among changes coming into effect on July 1, according to Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson.

“It is essential that small business owners and managers understand these changes,” Mr Billson said. “They should check their payroll and accounting systems have been updated and they should talk to trusted advisers like accountants and bookkeepers. It is important to get this right.

“With so many pressures on busy small business leaders as we near the end of the financial year it can be easy to overlook new and changing rules. However, there are significant changes that cannot be put aside.

“The end of the financial year is also a good time to not just have a stocktake but to take stock of the health of your business and yourself and to make use of the many helpful resources, tools and checklists available, including on our website www.asbfeo.gov.au.” 

The ASBFEO has highlighted some of the more important changes. It is not a complete list and some changes that may affect a business are specific to industry sectors or states. 

Instant asset write-off

The instant asset write-off threshold will be $20,000 on a per asset basis for 12 months from  July 1 for eligible small businesses with a turnover up to $10 million.

It will replace the previous arrangement introduced during the COVID pandemic which expires on June 30 and provided a write-off of eligible assets costing up to $150,000 that were first used or installed ready for use between March 2020 and 30 June 2023.

From July 1, assets valued at more than $20,000 (which cannot be immediately deducted) can be placed into the small business simplified depreciation pool and depreciated at 15 percent in the first income year and 30 percent each income year thereafter.

Small businesses have until June 30 to use the 20 percent tax deduction for investing in digital operations such as new equipment like technology, cloud-computing, e-invoicing or cyber security. The technology investment boost will apply to investments made between  March 29, 2022 and June 30, 2023 but to be eligible the item must be first used or installed ready for use by June 30.

[For more information; https://www.ato.gov.au/Business/Income-and-deductions-for-business/Deductions/Small-business-technology-investment-boost/?=Redirected_Technologyboost ]

A skills and training boost for training through a registered external training provider for new and existing employees applies between March 29, 2022 and June 30, 2024. [For more information: https://www.ato.gov.au/Business/Income-and-deductions-for-business/Deductions/Small-business-skills-and-training-boost/ ]

Small businesses may also be eligible for a range of tax deductions and concessions that are available before June 30 or from July 1 and should check with their trusted advisers or the Tax Office.  [ https://www.ato.gov.au/Business/Income-and-deductions-for-business/Deductions/  ]

Small Business Energy Incentive

A tax incentive worth up to $20,000 will provide an additional 20 percent depreciation for eligible assets that support electrification and more efficient use of energy by small businesses.

The bonus will be provided to businesses with an annual turnover of less than $50 million and is aimed at helping them save on energy bills by making investments like electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

Under the scheme, which is pending passage through Parliament, up to $100,000 of total spending will be eligible with the maximum bonus tax deduction being $20,000 per business. Eligible assets or upgrades will need to be first used or installed ready for use between July 1, 2023 and June 30, 2024.

Super guarantee

The super guarantee (SG) rate will increase from 10.5 percent to 11 percent for all employees eligible to receive superannuation.

Small business owners will need to use the new rate to calculate super on payments made to employees on or after July 1, even if some or all of the pay period is for work done before July 1. The SG rate is legislated to increase to 12 percent by 2025.

Employers are responsible for checking their payroll and accounting systems have been updated to ensure they correctly calculate their employee’s super guarantee entitlement. Payments must be received by the employee’s super fund by July 28.

[For more information: https://www.ato.gov.au/business/super-for-employers/paying-super-contributions/how-much-super-to-pay/ ]

National Minimum Wage and award rate

The National Minimum Wage will increase to $882.80 per week, or $23.23 per hour.

Award rates of pay will increase by 5.75 percent.

Both changes are effective from the first full pay period starting on or after July 1 and more information is available on the Fair Work Ombudsman’s website: https://www.fairwork.gov.au/newsroom/news/awr-2023   

Small businesses can sign up to email updates from the Fair Work Ombudsman and can use its Pay and Conditions Tool and pay guides.

The Fair Work Commission has also made a decision to increase minimum wages by 15 percent for some employees working in aged care from June 30. This is separate to the annual wage review.

[For more information: https://www.fairwork.gov.au/newsroom/news/15-per-cent-wage-increase-aged-care-sector ]

PAYG and GST uplift rate

The Australian Government will reduce the PAYG and GST uplift on quarterly payments from what would have been 12 percent to 6 percent for the 2023-24 income year in a move that should help assist cash flow for small businesses.

Single Touch Payroll

Employers are required to finalise employees’ Single Touch Payroll (STP) data by July 14. The Tax Office advises small business owners to double check they are finalising STP data for the 2022-23 financial year.

It also says employers are required to report pay as you go (PAYG) withholding information every time they pay employees through Single Touch Payroll. From July 1,these amounts reported through STP will be used to pre-fill labels W1 and W2 in activity statements in ATO online services.

[For more information: https://www.ato.gov.au/Business/Single-Touch-Payroll/ATO-PAYG-withholding-pre-fill-for-activity-statements/ ]

Paid Parental Leave scheme

The entitlement of 18 weeks’ paid parental leave pay will be combined with the Dad and Partner Pay entitlement of two weeks’ pay. This means partnered couples will be able to claim up to 20 weeks of paid parental leave between them. Parents who are single at the time of their claim can access the full 20 weeks.

These changes affect employees whose baby is born or placed in their care on or after July 1.

[For more information: https://www.fairwork.gov.au/newsroom/news/changes-to-the-paid-parental-leave-scheme 2023 ]

Temporary Skilled Migration Income Threshold

The Temporary Skilled Migration Income Threshold (TSMIT) will increase from $53,900 to $70,000. This applies to employers who wish to nominate workers for subclass 482, 186 and 187 visas and they must meet certain salary and employment condition requirements to ensure overseas workers are paid no less than an Australian worker doing the same work in the same location, known as the annual market salary rate (AMSR).\ 

Other resources

A useful end of financial year checklist for small business is available at: https://business.gov.au/finance/yearly-financial-tasks/end-of-financial-year-checklist

The Tax Office provides a Tax Time Tool Kit to assist small business to prepare their tax returns, which includes a directory of links to find information, tools, calculators and other support and resources. It will be available in early July at www.ato.gov.au

The ATO also provides a cash flow coaching kit, which is available at: https://www.ato.gov.au/Tax-professionals/Support-and-communication/In-detail/Cash-Flow-Coaching-Kit/

www.asbfeo.gov.au

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Business transitioning to a 4-day week? Consider 5 elements vital for success

OPINION by Jonathan Perumal >>

SUPPORT IS GROWING for the wider adoption of a four-day work week in Australia, meaning it is time for businesses to consider making the change, for the benefit of both organisations and workers.

Less stress on workers without cuts to productivity. That’s according to 95 percent of organisations that participated in 4 Day Work Week Global’s six-month Australasian pilot program. About 96 percent of employees who took part expressed a desire to continue working a four-day week.

It sounds like a no-brainer, but it’s easier said than done. Moving to a four-day work week is not just about adopting a new schedule; it requires a reimagination of the entire work experience for both businesses and staff, keeping the experience of workers front of mind throughout the process.

There are several considerations for business to keep in mind in figuring out how to make the shift to a shorter week without harming productivity. When done correctly, this shift can provide many benefits for employees, and ultimately, for businesses too. 

Benefits of shifting to a shorter work week

A four-day work week can lead to lower stress for workers and boost productivity levels for businesses, among other positive outcomes.

Reduced stress levels can uplift the mental and physical health of employees and increase their job satisfaction. With a shorter work week, they are less likely to feel burnt out and can consequently concentrate more during work hours. A four-day work week can foster a more focused and productive work environment, as there is a greater need to focus on tasks, decreasing the urge to get side-tracked.

Hours worked by an employee as a defining means of indicating productivity originated during the industrial revolution and, for knowledge workers, it’s time for work environments to evolve from this as an indicator of productivity. About 58 percent of respondents to Adaptavist’s recent survey believe that the true measure of productivity instead lies in the quality of work produced.

Fewer days in the work week means people gain more time to spend with their families and friends, pursue hobbies, or take care of personal responsibilities such as medical appointments – as a result, businesses may see less cases of employee absenteeism.

Employees who feel they have a better work-life balance are often more satisfied with their jobs and are more motivated to excel in their careers, which in turn improves employee morale and retention rates for businesses.

For businesses operating internationally, shifting to a four-day work week can help to address unique requirements involved with managing a remote and dispersed workforce.

A four-day work week can be a unique selling point for businesses, helping them to attract and retain employees who value work-life balance and a flexible schedule. However, it is a significant undertaking.

Factors to consider when transitioning to a four-day week

Businesses will reap the most benefit from a four-day work week by carefully considering how it will impact their operations, including the total number of hours worked in a week, workloads, and the impact on clients and customer service.

Here are the top five considerations:

  1. Hours. A key step in cutting down the number of days employees work is determining expectations for work hours in a shorter week. For example, will they remain at 40 hours per week, or should they be shortened to 32? Country-specific working laws will need to be considered when setting these standards.
  1. Workloads. To guarantee the benefits of four-day work week, such as reduced stress, staff workloads should not be increased to compensate for a shorter week – there is a delicate balance between maintaining deadlines and overburdening workers.
  1. Coverage. Cross-training and strategically scheduling work ensures effective support for clients and employees, helping departments to adequately service their respective areas and ensure that critical tasks and responsibilities are still covered every day of the week. Businesses may need to hire more employees to fill gaps or upgrade their technology to assist with employees’ new scheduling requirements.
  1. Communication. By developing a thorough communication plan before announcing the shift to a shorter week, businesses will be better equipped to communicate to employees the changes involved with the shift, what it entails, and how it will impact their daily routines. Once they are introduced, getting feedback from workers on the changes ensures that they are beneficial for all involved.
  1. Customer impact. Similarly, a thorough analysis of the effects on customer satisfaction and customer service is essential for success, as is communicating the changes with customers. An assessment on any upfront costs associated with a four-day work week should also be undertaken.

A four-day work week can positively impact business productivity and boost workforce morale. However, it is important to carefully consider how the shift will be rolled out to ensure it occurs as seamlessly as possible.

About Jonathan Perumal

Jonathan Perumal is the country manager for Australia and New Zealand (ANZ) at Safeguard Global, helping ANZ companies hire talent anywhere in the world, quickly and compliantly. Mr Perumal has worked for a several fast-growth tech companies including Salesforce, Success Factors, OneLogin, Workday, and Q-CTRL over the past two decades and joined Safeguard Global last year following its expansion into ANZ. He is described as a passionate customer-focused leader with a track record of driving revenue and building strong team, client, and business partner relationships. Mr Perumal has worked with cross functional units to drive business improvement through system optimisation and sales process improvement and his insights into productive  workplace transformation are keenly sought. www.safeguardglobal.com

 

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ATO changes working from home tax deduction rules: expert commentary

ADJUSTING to the ‘new normal’ of conducting business while emerging from the worst of the COVID pandemic has been thrown another curve ball by the Australian Taxation Office (ATO) changes to working from home (WFH) taxation methods.

At the height of the pandemic, the ATO incorporated an increase in the home office deduction from 52c to 80c per hour on WFH expenses. Now the ATO has announced it has changed that figure to 67c per hour – but taxation specialists have criticised the newly introduced challenges in using the method.  

BlueRock tax advisor in accounting, Eylem Mustafoff said claiming WFH tax deductions has now become a burden “and unfortunately, not many have seemed to notice except for accountants”.

“Under the new method, indicative estimates won’t cut it,” Ms Mustafoff said. 

“With record keeping requirements beefed up, Australians will now have the burden of tracking every hour and every expense, which makes it less attractive to suck up the lower rate of 67 cents per hour.”

As of March 1 2023, individuals working from home will need to keep records to use the new revised fixed-rate method as it is no longer enough to keep a four week diary and use it as an estimate of yearly hours worked from home.

While the ATO has announced launching a campaign to let people know about the changes, Ms Mustafoff said she was concerned the messages were not cutting through, so she has prepared key points and tips on working from home tax deductions:

Why the WFH tax changes aren’t great for taxpayers

“First, no one wants the burden of having to keep detailed records of when they WFH and what costs they incur as a result. The big risk however is that if the ATO isn’t satisfied that your records meet the requirements, you could end up with no deduction at all. This is because if you don’t have enough records for the fixed rate method, you won't have enough records to do the actual method.

“It is advised that taxpayers maintain records of actual use even if they don't use the actual use method. Because if a claim for the revised fixed rate method comes into question – the actual method will be the only fall back.”

Record keeping requirements for WFH expenses 

“Keeping track of expenses and records can be a daunting task, but it's now essential if you want to claim WFH expense deductions. From March 2023, you must keep a record of the actual number of hours worked from home, and you can't use estimates or four-week diaries during this period.

“You can no longer rely on the revised fixed-rate method if you don’t meet the record-keeping requirements or if the ATO isn’t satisfied with your records. If you lodge an objection about your work-from-home expenses, you can’t use this method and can only claim deductions based on actual expenses incurred. Therefore, it is essential to keep accurate records of your expenses to ensure you can claim the maximum tax deductions possible.”

How to keep records for WFH tax deductions

“The best way to keep account of the exact number of hours you have worked from home is by creating a timesheet. For example, the records would have to show: 21 Feb 23 – worked from home 7.5 hours; 24 Feb 23 - worked from home three hours etc. 

A few quick tips for keeping track of additional costs you incur from WFH

Keep records of your cleaning expenses for your home office: Remember to track any private use by you or other household members.

Keep records of your utilities: Use the cost per unit of power from your utility bill. Find the average power consumption per hour for each appliance or light, and multiply it by the total annual hours used for work-related purposes.

Keep records of your phone, data, and internet.

Keep your itemised phone bill, keep track of your work-related calls and compare these to your total calls to determine your work-related percentage. 

Bottom line

“When it comes to claiming work-from-home (WFH) deductions, as accountants we consider what’s best for our clients,” Ms Mustafoff said.

“Sure, the revised fixed-rate method is capped at 67 cents per hour, but is it really the way to go?

“It’s worth taking a closer look at the actual cost method, even if it means keeping more records and crunching more numbers. The potential savings could make a big difference.”

www.bluerock.com.au

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