As a result of COVID-19, the ATO has announced a simplified method to make it easier to claim tax deductions for working from home.
From 1 March 2020 until at 30 June 2020 (may be extended), taxpayers can claim 80 cents per work hour for all their running expenses.
What you can claim under the shortcut method:
- Cleaning costs for a dedicated work area
- Phone and internet expenses
- Computer consumables (i.e, printer paper and ink) and stationery
- Depreciation of home office furniture and furnishings (i.e, an office desk and a chair)
- Depreciation of home office equipment (i.e, a computer and a printer)
- Electricity expenses associated with heating, cooling and lighting the area at home which is being used for work
This means that under this method, separate claims cannot be made for any of the above running expenses (including depreciation of work-related furniture and equipment).
As a result, using the 80 cents per hour method could result in a claim for running expenses being lower than a claim under existing arrangements (including the existing 52 cents per hour method for certain running expenses).
Furthermore, as per the ATO’s announcement, under the 80 cents per hour method:
- there is no requirement to have a separate or dedicated area at home set aside for working, such as a private study
- multiple people living in the same house could claim under this method (i.e, a couple living together could each individually claim running expenses they have incurred while genuinely working from home, based on the 80 cents per hour method); and
- an individual will only be required to keep a record of the number of hours worked from home as a result of the COVID-19, during the above period. This record can include time sheets, diary entries/notes or even rosters
To claim a tax deduction for working from home, all of the following must apply:
- You must have spent the money
- The expense must be directly related to earning your income
- You must have a record to prove it
EXPENSES YOU CANNOT CLAIM
If you are working from home only due to COVID-19, you:
- cannot claim occupancy expenses such as mortgage interest, rent and rates
- cannot claim the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work.
RECORDS YOU MUST KEEP
If you use the shortcut method, you need to keep a record of the hours you worked at home, i.e, timesheets or diary notes.
In these challenging times it is important that you seek advice if needed and should you have queries about the new tax measures and how it impact you, we can be reached here.