What working from home means for your Tax Return

Coronavirus has changed the way we work and many of us are adjusting to Zoom calls from home and skipping the morning commute into work. While we are saving time and money on travel, it also means an increase in running expenses at home. Here’s what you need to know if you are going to make a tax claim for home office expenses on your tax return this year.

As with all work related deductions, you must have spent the money to claim a deduction, the expense must be directly related to earning your income and you should keep records to prove it.

Expenses you can claim

You are entitled to claim a proportion of additional running expenses you incur while working from home, which include:

  • Heating, cooling and lighting bills
  • Costs of cleaning your working area
  • Phone and internet expenses
  • Computer consumables like printer paper, ink and stationery
  • Home office equipment such as furniture and computer equipment that cost less than $300 can be claimed in full immediately, while you can claim depreciation for items that cost over $300

Expenses you can’t claim

If you are working from home only due to COVID-19, you can’t claim:

  • Occupancy expenses such as mortgage interest, rent and rates
  • The cost of general household items you may have otherwise been provided with at work.

Working out your claim

The three options you can use to calculate your additional running expenses are:

Shortcut method

With the recent increase in the number of people working from home, the ATO has introduced a temporary simplified method of calculating additional running expenses from 1 March 2020 to 30 June 2020. This method allows you to claim a rate of 80 cents per work hour for all additional running expenses provided you are not reimbursed by your employer. The set rate covers all the expenses you are entitled to claim that are listed above including depreciation, electricity, phone/internet and other consumables.

You do not necessarily need to have a dedicated area of your home set aside for working. You also 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. This is one of the simpler methods of working out your claim.

Fixed rate method

Under this method you can claim a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture along with

  • The work related portion of costs of phone and internet expenses, computer consumables, stationery
  • The work related portion of the decline in value of a computer or laptop

Actual cost method

Using this method you can claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

Keeping Records

Keeping sufficient records will make it easier when it is time to lodge your tax returns.

If you are using the shortcut method, you only need to keep a note of the hours you worked from home, a diary or time sheets will suffice.

If you are using one of the other methods to make your claim, you must also keep a record of diary entries and receipts along with the number of hours you worked from home.

If you need any help with working out the above please contact us here.