If you are an employee who works from home you may be able to claim a deduction for expenses you incur that relate to your work. This applies even to employees required to work at hoke during COVID-19 lockdowns. To claim a deduction you must be working from home not just doing things like checking email or taking the occasional call and you must incur additional expenses as a result of working from home.
- If you are an employees and you work from home you may be able to claim a deduction for expenses related to your work
- There are 3 was to calculate your deduction – the new “shortcut” method introduced to help people claim a deduction for COVID-19 related work from home expenses, the “fixed rate” method and the “actual expenses” method
- Provided you have the required records you can use the method that gives you the biggest deduction
- To use the shortcut method all you need to do is track how many hours you’ve worked at home and you don’t need receipts, but the other methods might give you a bigger deduction
How to calculate your deduction
There are 3 methods you can use to calculate your deduction. Each has different record keeping requirements. You can use whichever method you like, provided you satisfy the record keeping requirements and any other requirements.
The new “shortcut method”
In the 2019/20 tax year the ATO introduced a new, simplified method of calculating deductible home running expenses for people working from home due to COVID-19. This method can be used again in the 2020/21 tax year (1 July 2020 to 30 June 2021).
All you need to do is calculate the number of hours you worked at home during this period and multiply that number by $0.80. The resulting total is your tax-deductible expense.
This is meant to include all of your home running expenses including things like electricity and gas, depreciation of things like furniture, cleaning expenses, phone costs, internet costs, computer consumable, stationery, and the depreciation of things like computers, laptops, and tablets.
If there is more than 1 person working from your home each person can make a deduction using the same approach.
If you use the new simplified method for calculating your deduction there is no need to keep receipts or calculate specific costs, but you still need to keep records to support the number of hours you worked. Timesheets, rosters or diary notes should suffice for this.
More details are available from the Australian Taxation Office here Working From Home During COVID-19.
The fixed rate method
To use this method you must also have a dedicated work area that you use when working from home, records that show the work related portion of expenses you claim that are not covered by the fixed rate per hour and records of how many hours you worked at home.
With this method you claim the fixed rate of $0.52 per work hour for heating, cooling, lighting, cleaning and depreciation of office furniture.
In addition to this “fixed rate” you can also claim the work-related portion of your actual costs for phone and internet expenses, computer consumables and stationery and the work-related portion of the decline in value of things like computers, laptops or similar devices.
The actual cost method
With this method you claim the actual expenses you incur when working from home.
It’s likely to include depreciation of assets such as furniture, furnishings, phones and laptops, cleaning expenses, heating, cooling and lighting expenses, phone and internet and computer consumables.
You’ll need a reasonable method for calculating each of your costs such as itemised bills for phone and internet expenses, receipts for cleaning and a calculation method that apportions costs based on something like floor space and energy consumption and costs per unit for appliances used for heating, cooling and lighting.
Don’t forget the 3 golden rules
Regardless of which method you use to claim your tax deduction for working from home expenses the same 3 ‘golden rules’ apply:
- you must have spent the money
- the expense must be directly related to you earning an income
- you must have the appropriate record to prove it
Further information about claiming a tax deduction for working from home expenses using the fixed-rate method or the actual cost method is available from the ATO here Home office expenses
MoneyBrilliant’s Tax Deduction Feature
To help you keep track of all your expenses that might be tax-deductible – including working from home expenses – MoneyBrilliant Plus customers can use the MoneyBrilliant Tax Deduction feature. By answering a few simple questions MoneyBrilliant can identify expenses that could be tax-deductible for you. You can review each transaction, decide whether it is tax-deductible, what proportion of it is tax-deductible, and track it until you complete your tax return at the end of the year. You can even send the list to your accountant or tax agent. You’ll find the Tax Deduction feature on the Manage My Spending dashboard.
This summary has been prepared by MoneyBrilliant Pty Ltd (AFSL 492711, ACL 493068). The information in this summary is of a factual nature only. We are not suggesting or recommending that you take any particular course of action in relation to any financial product or service. It does not take into account your personal circumstances or objectives. If you need financial advice or taxation advice you should seek advice from a licensed financial adviser or tax agent. You may also be able to access additional information from the websites of the Australian Securities and Investment Commission (ASIC) and the relevant product providers.