Tax tips when you're working from home

Support: The ATO's new Shortcut Method has been designed to help people working from home claim quickly and easily during the COVID-19 outbreak. Photos: Shutterstock.
Support: The ATO's new Shortcut Method has been designed to help people working from home claim quickly and easily during the COVID-19 outbreak. Photos: Shutterstock.

Working from home has become attractive for businesses and employees for a number of reasons, including increasing productivity and lifestyle opportunities and cutting costs such as office space rental.

Following the outbreak of COVID-19, the push to work from home gained added momentum.

With the rise in home offices, though, comes the need to be aware of tax implications. This can include anything from purchasing furniture and equipment for your home office through to claiming deductions.

Accountant and YBM partner, Brad Evans, said to claim a working from home deduction, three rules apply.

"Firstly you must have spent the money and you can't claim something you have already been reimbursed for or your employer has provided," he said. "Second, the outgoing expense has to be directly related to earning your income, and finally you must keep records for proof."

If you work from home, you will be able to claim a deduction for the expenses you incur. Expenses that you can claim include:

  • Utility costs such as electricity, lighting, heating and cooling, however they only apply to your work area and equipment.
  • Phone and internet expenses.
  • Stationery and computer consumables.
  • Home office equipment such as furniture, phones, computers and printers. With these items you can claim either the full cost (items up to $300), or the decline in value (items over $300).

Expenses that you can't claim include:

  • Normal occupancy expenses such as rent, rates, strata or interest.
  • General household items such as coffee, tea, milk and toilet paper.

Normally you would have to use one of two methods to make a claim.

The Actual Cost Method

This is where you claim the actual work-related portion of all your running expenses. You must have a dedicated home office to use this method and keep extensive records which can make this method difficult.

The Fixed Rate Method

This is where you claim a flat rate of 52 cents per work hour for electricity, lighting, heating and cooling, along with the decline in value of office furniture. You can also claim work-related portions of phone and internet expenses, computer consumables, stationery and the decline in value of computers or laptops.

However, you still need to keep a diary record of hours worked at home along with receipts and bills for additional expenses.

Brad said that, thankfully, the Australian Tax Office had devised a simpler method to cater for people forced to work from home since the outbreak of COVID-19. It is a temporary solution for those who don't normally work from a home office.

The Shortcut Method

This method has been designed for people working from home during the COVID-19 outbreak and allows people to claim a flat rate of 80 cents per work hour for ALL expenses incurred while working from home.

You don't need to have a dedicated home office to claim via this method, however while working from home you must be incurring actual expenses as a result of working from home and fulfilling work duties, and not just completing minimal tasks such as taking quick phone calls or checking emails.

For more information on how these methods affect your circumstances, it's best to speak to your accountant or visit www.ato.gov.au.

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