ATO Reveals Shortcut For Claiming Working From Home Expenses During Coronavirus

With the COVID-19 outbreak forcing many Australians to work from home indefinitely for the first time, the federal government has announced changes to how tax deductions can be claimed for working from home expenses.

On Tuesday, Minister for Housing and Assistant Treasurer, Michael Sukkar, announced special arrangements have been put in place to allow for easier working from home tax claims to be made for the thousands of Australians who will be doing so for the first time.

As part of the changes, all Australian taxpayers working from home can now claim a rate of 80 cents per hour for all of their running expenses.

This temporary arrangement, which applies for work done after March 1 2020, allows Aussies to do away with earlier requirements to calculate costs for specific running expenses.

It’s also available to taxpayers individually, meaning even if you’re living with a partner or with family, multiple people in the same house can all claim using the new rate.

“The shortcut method provides a rate of 80 cents per hour and will only require you to keep a record of the number of hours worked from home,” Assistant Commissioner of the Australian Tax Office, Karen Foat, said.

This recognises that many taxpayers are working from home for the first time and makes claiming a deduction much easier.

“If you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim.”

Importantly, while the new arrangements are available to any taxpayer working from home, those who would prefer to use the existing method of calculating all or part of their running expenses are still able to do so.

Speaking to 10 daily, finance expert and founder of Women With Cents, Natasha Janssens, shared the dos and don’ts of completing your tax return if you choose to do this, following changes to your way of work during the coronavirus pandemic.

Mistake #1: Claiming rent or mortgage repayments

While you might assume if you’re working from a designated workspace, such as a study, you would be able to claim a portion of your mortgage or rent (and subsequent costs like home insurance), this isn’t the case according to Janssens.

“Unfortunately, the ATO is very clear that unless ‘the area has the character of a place of business’ — such as a hairdresser’s salon, a photography studio or a catering kitchen, for example — you cannot claim occupancy expenses,” she explained.

“If in doubt, speak with your accountant.”

Mistake #2: Claiming expenses covered by your employer

If you have already been reimbursed for an expense by your employer — such as the cost of your internet or your mobile phone — you cannot claim it again on your tax return.

“You also cannot claim depreciation expenses on a computer or mobile phone you have purchased via a salary sacrifice arrangement or one that was provided to you by your employer,” Janssens said.

Mistake #3: Claiming the full amount of phone and internet usage

While you are entitled to claim the cost of internet and phone usage when working from home, you can only claim the portion that was work-related.

Janssens said this can easily be determined with phone calls as you can obtain an itemised list of calls (made and received) that were work-related or keep a detailed journal and apportion the bill accordingly.

Natasha Janssens is a finance expert and author of Wonder Woman’s Guide to Money. Image: Supplied

“With an internet, however, it can get a bit tricky to determine how much data you have used for work, especially if there are multiple people at home streaming data at the same time,” Janssens said.

“There is no set way to do this, and since everyone’s circumstances are different, it would be wise to speak with your accountant to determine a reasonable basis for estimating your claim.”

Mistake #4: Failing to keep records

If you are going to claim home office expenses, Janssens advises keeping detailed records of the dates and hours you worked from home and receipts and invoices for any items claimed.

“During the coronavirus pandemic, the ATO recommends keeping two sets of records: a four week-representative journal of the hours you normally work from home (one day a week, for example) and the actual hours you have worked from home for the duration of the pandemic,” Janssens said.

Mistake #5: Missing out on available deductions

Providing that you are careful to claim only the work-related portion of the expenses you incurred and haven’t been reimbursed for, Janssens explained you are generally able to claim items such as:

  • Printing consumables and stationery supplies.
  • Phone and internet.
  • Depreciation on office equipment (such as your printer, computer and mobile phone).

“You may also be able to claim the cost of your heating and cooling, lighting, cleaning and depreciation of furniture,” Janssens said.

“But this will depend on whether you are working in a common space like a living or dining room or if you have a designated space such as a study.”

If you work in a common area

If you work out of a common area, Janssens said, generally speaking, you cannot claim the cost of energy bills, cleaning and depreciation on furniture.

“The exception to this would be claiming the additional cost of energy used if you had exclusive use of the space,” she said.

“If your family is in the room while you are working, the ATO advises that you would only be able to claim the cost of electricity to power your laptop while you work.”

If you work in your study

However, if you work out of a designated study, you are able to claim the work-related portion of your energy bills for that particular space, as well as depreciation on office furniture and the cost of cleaning.

If doing this, Janssens said you can choose to use a fixed rate or apportion your actual expenses.

“The fixed rate is set by the ATO (in 2018/2019 this was 52c per hour worked from home) and only requires you to maintain a journal of the hours worked from home to support your claim,” she said.

Alternatively, if using actual expenses these will have to be apportioned (for example, based on floor space) and will require that you keep additional records such as receipts and invoices.

Janssens warned to be mindful when claiming actual expenses that you have to factor in not just your own private use of the study, but that of your family member’s as well.

With so many working from home, Janssens expects the ATO will be looking extra closely at work-related expense claimed in this financial year.

“The best advice I can give you is to keep careful records and speak with your accountant to make sure you claim everything you are entitled to,” she said.