At Cloud8 Accounting & Taxation, we know that completing a tax return can be time-consuming and confusing. Especially due to Covid-19, we understand you want to get your much-needed tax refund fast.
We are here to help to lodge your return ASAP and maximize your tax refund!
Working from Home deduction during COVID-19
We understand that due to COVID-19 your working arrangements may have changed. If you have been working from home, you may have expenses you can claim a deduction for at tax time.
Tracking these expenses can be challenging, so from 1 March to 30 June 2020, the ATO has introduced a temporary shortcut method. It’s a simple way to calculate these expenses with minimal record-keeping requirements.
What expenses you can claim?
If you work from home, you will be able to claim a deduction for the additional expenses you incur. These include:
- 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
- the full cost of items up to $300
- the decline in value for items over $300.
WARNING! These expenses must be directly related to earning your income and you must keep receipts. In other words, you cannot claim a deduction for items provided by your employers, or if you have been reimbursed for the expenses.
What expenses you can’t claim?
If you are working from home, you can’t claim:
- occupancy expenses such as rent, mortgage interest, water, and rates. (if you are employees)
- the cost of coffee, tea, milk, and other general household items your employer may otherwise have provided for you at work
- costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
- items that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone
- time spent not working, such as time spent homeschooling your children or your lunch break.
3 methods to calculate your working from home expenses
As a result of Covid-19, you now have three ways of calculating home office expenses:
- Fixed-rate Method (52 cents per hour)
- Shortcut Method (80 cents per hour – only available from 1 March to 30 June 2020)
- Actual Cost Method
1. Fixed rate Method
You can claim a deduction of 52 cents for each hour you work from home for the work-related expenses you incur for additional running expenses. The fixed rate covers all expenses you incur for:
- the decline in value of home office furniture and furnishings – for example, a desk
- electricity and gas for heating, cooling and lighting
- the cost of repairs to your home office equipment, furniture and furnishings.
To claim using this method, you must keep records of either:
- your actual hours spent working at home for the year
- a diary for a representative four-week period to show your usual pattern of working at home
2. Temporary Shortcut Method
You can claim a deduction of 80 cents for each hour you work from home from 1 March to 30 June 2020 as long as you:
- are working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls
- have incurred additional running expenses as a result of working from home.
TIP! The shortcut method doesn’t require you to have a dedicated work area, such as a private study. You also don’t need keep a dairy for four weeks like the other two methods.
The shortcut method covers all additional 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 including capital items that cost less than $300
- cleaning expenses
- your phone costs, including the decline in value of the handset
- your internet costs
- computer consumables, such as printer ink and stationery
- the decline in value of a computer, laptop or similar device.
3. Actual Cost method
Under the actual expenses method, you can claim the additional running costs you directly incur as a result of working from home. This may include the following expenses:
- electricity and gas for cooling, heating and lighting
- the decline in value of home office furniture (desk, chair) and furnishings,
- the decline in value of phones, computers, laptops or similar devices
- phone expenses
- internet expenses
- cleaning (if you use a dedicated area for working)
- computer consumables and stationery – such as ink
If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. For example, if the area you use for work is a common area of the home such as a lounge room and that area is being used by other members of your household for another purpose (such as, family members watching television) at the same time you’re working, you won’t be incurring any additional costs for lighting, heating or cooling as a result of working in that room.
To calculate the work-related portion of your actual expenses you must have records. You can:
- keep a record of the number of actual hours you work from home during the income year
- keep a diary for a representative four-week period to show your usual pattern of working at home
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