With tax time not that far away, if you are now required to work from home due to COVID19 you are probably wondering whether there are extra deductions you can claim at tax time. And the clear and unequivocal answer is: Yes!
Here are the top 5 things you need to know about claiming work from home expenses this financial year.
#1 Two sets of rules apply
The ATO has introduced a new ‘shortcut’ method of claiming work from home expenses during COVID19 meaning that there are two sets of rules that apply this year. There’s the conventional method that applies to working from home in the pre-COVID19 period, and the shortcut method that applies during COVID19 (i.e. from 1 March 2020).
#2 You can choose which method to use
For the period 1 March 2020-30 June 2020 you have a choice of whether to use the shortcut method or the previous conventional method, depending on which will give you a larger tax deduction. For the period prior to 1 March 2020 you will have to use the conventional method only.
The shortcut method is simpler and involves keeping a log of the hours that you work from home, then claiming a tax deduction of 80c for every hour worked. This rate is intended to cover all your costs including phone, internet, energy bills, depreciation on your laptop and home office furniture.
The conventional method involves either claiming the work related portion of actual expenses incurred, or using a rate of 52 cents per hour to cover cost of energy bills, cleaning and depreciation of office furniture, plus claiming the work related portion of the cost of your telephone, internet, stationary and computer depreciation.
Keep in mind that the conventional method is more complicated to claim on and comes with additional requirements such as being able to prove how you calculated the work related portion of your internet and energy bills, and keeping a copy of bills and receipts.
#3 You don’t have to have a designated work from home space
Usually when claiming certain work from home expenses such as your energy bills, the ATO requires you to have the use of a designated space such as a study. However, if you choose to use the shortcut method, this requirement has been waived, meaning that you can work from your dining table and still be eligible to claim using the shortcut method.
#4 More than one person in the same household can claim
If you have a spouse or housemates, each of you is individually entitled to use the 80c per hour method to claim work from home expenses.
#5 There are some things you can’t claim
Regardless of the method you use, there are certain expenses that you can’t claim. You cannot claim expenses that your employer has reimbursed you for (such as stationery). You cannot claim your rent, rates, or the interest on your mortgage. And you definitely cannot claim things like toilet paper, tea, coffee and snacks (which are likely items your workplace would generally provide). If you use the shortcut method, you also cannot claim additional expenses such as the work related portion of your energy, telephone, internet bills, or the depreciation of your laptop or home office furniture, as these have already been factored into the rate.
There are pros and cons to each of the methods available. The best thing to do is to keep detailed records of the hours you worked from home this year, keep your receipts and copies of energy, phone and internet bills and then determine which method would give you the largest tax deduction.
With an expected surge in the number of people claiming work from home tax deductions, you can be sure that the ATO is going to be monitoring this area closer than usual. This is why, if in doubt about what you can and can’t claim, it is best that you speak with your accountant or tax advisor. For more information on working from home tax deductions visit ato.gov.au.