There were a lot of changes to the way people worked (and are still working) during COVID-19, including the fact that many of us worked at home for many weeks as offices and businesses were shut. One of the big questions we are getting asked at the moment is, can I claim as a Tax Deduction seeing as though I've now been working at home and incurring additional costs.
The short answer is, yes, there are certainly some expenses that you are able to claim as a tax deduction for the time you were working at home. Let's take a look at what that means.
In a nutshell you can claim costs such as heating, cooling and lighting for the area in your home that you have been working from. As well as things like mobile, home phone and internet if you were required to use these as part of your job.
You have always been able to claim the above costs for working at home, but the ATO have made the process even easier, by giving us a shortcut method to calculate your deduction.
You can simply claim 80 cents per hour, for ever hour that you have had to work at home during COVID-19. This shortcut method is available from 1st March to 30 June.
What method should I use?
If your job requires you to work from home then you have 3 options for your deductions :
- your actual expenses
- the normal fixed rate of 52 cents per hour PLUS the work-related portion of expenses not covered by that rate
- the new shortcut method
Now the shortcut method is only available from 1st March to 30 June, so if you worked from home previously we will need to select either method 1 or 2 for the period 1 July to 1 March
Actual Expenses
This is by far the most complex, and time consuming of the deduction methods. You must have a dedicated home office working area in order to claim using this method. You still need to keep a record of the number of hours you work at home during the year including keeping a 4 week diary showing your usual pattern (ie when you start and finish work and when you take a break). You can claim the cost of any home office furniture, cost of phones, computers or laptops (note these need to be depreciated over a number of years). You need to ensure you are only claiming the work-related percentage of these. You can claim your Mobile and Internet. To do this you need to show the work-related use vs private use over a 4 week period. You then claim the work-related percentage only. You can claim the cost of ink, printing & stationery. But again you can only claim the work-related percentage. You can then claim the actual cost of lighting, heating and cooling. To do this you need to work out the cost per unit of the power used, the average units used per hour (the power consumption per kilowatt hour for each appliance, equipment or light), and then you need to work out the total annual hours used for each item.
Fixed Rate
The fixed rate method is claiming a deduction of 52 cents for each hour you work from home. This fixed rate covers your lighting, cooling, heating and office furniture costs. In order to claim this deduction you need to ensure you have a dedicated home office area, not just be using the kitchen table. You also need to keep a record of the actual hours you spend working at home. You can keep a 4 week diary showing when you start work, when you finish work, and the total number of hours spent working over this 4 week period. We can then use that 4 weeks as an indicative amount to claim for the full year.
You then separately claim your phone, internet, computer consumables and the cost of the equipment (computers & phones) that are used. To claim these expenses you need to have receipts, as well copies of your phone bill showing work related vs private calls to determine your work-related vs private use percentage.
Shortcut Method
This shortcut method covers your lighting, cooling, heating, phone, internet, office furniture, computer and consumables such as printer ink and stationery. So you simply claim 80 cents multiplied by the number of hours you worked from 1 March to 30 June 2020. That also means if you normally claim your Mobile Phone costs each year as you use your Mobile for work, you won't be claiming that costs from 1 March to 30 June, as it's all included in the shortcut method 80 cent rate.
What proof do I need
You are required to keep proof of the fact that you were working from home as well as a record of the hours that you have spent. Whilst you don't have to lodge this proof with your tax return, if you are audited, you will need to show these records to the ATO.
If your employer has given you a directive (in writing) that you are required to work 38 hours a week from home, instead of your normal workplace, you should keep this with your tax records. You can then keep a record of your timesheets, a diary showing the hours worked or your roster that will back-up the number of hours your employer was paying you for.
If you are claiming using the Fixed Rate method remember you need to have a 4 week diary indicating hours worked, as well as proof of the split between your private and personal use for your phone and internet.
If you are claiming using the actual method, you need to ensure you are keeping receipts, your 4 week diary and your itemised bills.
What can't I claim
You can't claim the cost of things that you would ordinarily get at work. So that means you can't claim tea, coffee and milk or toilet paper! You also can't claim the costs of anything your employer has paid for on your behalf.
