Working From Home Deductions
The ATO has provided a simple solution to determining the deductibility issues surrounding home expenses.
To claim a 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
- the expense has not been reimbursed
If you are not reimbursed but receive an employer allowance to cover these expenses you:
- must include the allowance as income in your tax return.
- can claim a deduction for additional running expenses such as;
- electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- cleaning costs for a dedicated work area
- phone and internet expenses
- computer consumables (for example, printer paper and ink) and stationery
- home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the:
- full cost of items up to $300
- decline in value for items over $300.
Expenses you can’t claim are:
- occupancy expenses such as mortgage interest, rent and rates
- the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work.
Ordinarily this overall methodology may be applied by using either the;
- actual cost method ─ claiming the actual work-related portion of all your running expenses, calculated on a reasonable basis or the
- fixed rate method ─ claiming all of:
- a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture,
- the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery, and
- the work-related portion of the decline in value of a computer, laptop or similar device.
As these can be complex the ATO will accept an alternative shortcut method of calculating additional running expenses for the period starting 1 March 2020 until at least 30 June 2020. The period may be extended depending on when work patterns return to normal.
Under this method you can claim a deduction of 80 cents for each hour you work from home due to COVID-19 as long as you are:
- working from home to fulfill your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls,
- incurring additional deductible running expenses as a result of working from home.
You do not have to have a separate or dedicated area of your home set aside for working, such as a private study.
The shortcut method rate covers all deductible running expenses, including:
- electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
- the decline in value and repair of capital items, such as home office furniture and furnishings
- cleaning expenses
- your phone costs, including the decline in value of the handset
- your internet costs
- computer consumables, such as printer ink
- the decline in value of a computer, laptop or similar device.
You do not have to incur all of these expenses, but you must have incurred additional expenses in some of those categories as a result of working from home due to COVID-19.
If you use the shortcut method to claim a deduction for your additional running expenses, you cannot claim a further deduction using any other method.
You must keep a record of the number of hours you have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters.
Under the shortcut method, you only need to keep a record of the hours you worked at home.
If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses.
The ATO are to be commended for this initiative.