Working out your tax claim, now you’re working from home.
You’ve turned your home into a home office during COVID-19. So, what can you claim on your tax return and how do you claim it? Fortunately, the ATO has now made it easier than ever.
If you are one of the hundreds of thousands of Australians now working from home thanks to social distancing measures, part of your house has become your workplace.
After the stockpiling of toilet rolls and pasta subsided, a second purchasing rush got underway. With working from home on so many agendas, stocks of desks, stationery, monitors, printers, office chairs and noise-cancelling headphones ran low around the country as home offices were quickly cobbled together.
Work-related phone use is up, the internet is being pushed to its limits – for work and binge-watching TV – not to mention increased power use with everyone at home, all the time, every day.
Working from home, you’ll find yourself personally paying for things your employer would usually cover at your place of work.
The good news is, if purchases and costs are work-related, chances are some or all the costs may be claimed on your next tax return.
We’ll run through the traditional ways to claim for working from home expenses and also provide details on the ATO’s new temporary simplified method, introduced especially to apply to the current COVID-19 crisis time period.
Here’s what you can claim
In the eyes of the ATO, there are three main types of work-related expenses that you may be able to claim for – running expenses, occupancy expenses, and phone and internet.
Firstly, it’s important to identify a specific space in your home that is the home office or workspace. If it’s a room that’s used for different things, like a dining room, or a shared space like a living room, then you claim for the time that you have exclusive use of the area.
In short, the ATO allows you to claim for the work-related proportion of your household running expenses. These include:
- Utility bills for lighting, heating and cooling.
- The cost of cleaning your workspace (this doesn’t include untidy desks or every room you’ve sat down in with your laptop).
- The decline in value of your office equipment, computers and furniture, and the cost of maintenance and repairs to these. If you need help to work out depreciation, google ‘ATO depreciation tool’.
- Buying other necessary items like stationery and printer ink.
If you’re an employee, you generally can’t claim a deduction for rent, mortgage interest, property insurance, land taxes and rates – so capital gains tax (CGT) won’t apply. But if you are running a business from home, and claiming occupancy expenses, there could be CGT implications.
Phone and Internet
Working from home means you’ll be using your phone and internet a lot more for work. You can claim a deduction for the work-related proportion of your expenses, if you have records to support your claim – which brings us to the next part…
How can you claim?
Let’s be honest, working from home isn’t easy if you’re also trying to keep young kids occupied, supervise online schooling, avoid the snacks in the fridge and getting distracted with chores like hanging out a load of washing. Right now, working out your claim is something else you’d rather not have to deal with.
Fortunately, the ATO is simplifying the way to claim work-from-home expenses during the COVID-19 crisis.
Before self-isolation and social distancing came into effect – and most of us were probably working from our employers’ premises – there were two ways to work out what you could claim.
First is the diary method. For four weeks you record how much time you spend in the home workspace, compared to others who use it. The work-use proportion you end up with is applied to all your expenses over the year.
The other method is the fixed rate calculation. You use a fixed rate of 52 cents per hour for each hour you work from home. Instead of recording all your expenses for heating, cooling, lighting, cleaning and the decline of the value of furniture, you add up your hours and multiply it by 0.52 to find the dollar value.
Other running expenses like phone and internet, computer consumables and stationery, and depreciation of your computer needs to be worked out separately. And you’ll need to keep receipts and phone accounts and identify work-related calls.
But the ATO has now made claiming much easier.
A new shortcut has been introduced to make it easier to claim expenses if you’re working from home during the current COVID-19 crisis. For the period from March 1 to June 30, you can now claim a rate of 80 cents per hour for all your running expenses, rather than needing to calculate costs for specific running expenses. And all you’ll need to do is keep a record of the number of hours worked from home.
If more than one person is working in the same house, all of you can claim. A couple living together can each individually claim the 80 cents per hour rate, and to simplify thing further, you no longer must identify your specific workspace.
So now there are three ways that you can choose to calculate your additional running expenses for the March 1 to June 30 period:
- Claim a rate of 80 cents per work hour for all additional running expenses.
- Claim a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture, plus calculate the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.
- Claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.
Just remember, the existing methods still apply to all working from home expenses before March 1.
The Government will review these changes and possibly extend them into the next financial year, depending on when work patterns return to normal.
Things are changing daily and this article is intended as a general guide, rather than specific tax advice. Ideally, you should seek professional tax advice from an accountant or visit the ATO website for further information.
Tax advice: the information in this article does not constitute advice. This article has been written for general informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. As taxation legislation is complex, we recommend you speak with your tax advisor, financial advisor or contact the ATO for further details and expert advice regarding your personal circumstances
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this article is correct as of the date of publication and is subject to change.