April 8, 2020
Are you one of the many people across Australia who has had to change from working on a site or central office to now work from your own home? If so, there are tax deductions available to you for the cost of your home office running expenses.
What do I have to start doing now?
We strongly recommend that you:
- Note down the start date of when you began to work from home due to COVID-19
- Keep note in a diary the hours you work for a whole month if you don’t already keep daily timesheets for work
- Keep a log for 4 weeks showing your private Vs work use of your telehone, computer etc
- Keep records of receipts for costs incurred such as purchase of computers, printers, desks, telephone and internet bills. Download the office lens app to turn your mobile phone into a powerful scanner and save your scanned receipts to your OneDrive or a folder https://www.youtube.com/watch?v=jzZ3WVhgi5w
What deductions were available before 1 March?
Before 1 March 2020 the Tax Office allowed a fixed rate method and required people working from home:
- to show that they had a dedicated area/room for their work
- Allowed $0.52 per work hour for heating, cooling lighting, cleaning and the decline in value of office furniture.
- Allowed actual cost for the work-related portion of phone, internet, computer consumables, stationery and
- Allowed actual cost for the work-related portion of the decline in value (depreciation) of a computer, laptop or similar device
What deductions are available now?
From 1 March 2020 the Tax Office now:
- Does not require you to have a designated area/room in your house
- Allows you to claim home office expenses as per usual using the fixed rate method explained above
- Allows an alternative shortcut method of $0.80 for each hour you work from home due to COVID-19.
- Allows multiple people living in the same house to claim under the shortcut method
What does the alternative shortcut method of $0.80/hour cover?
The shortcut method rate covers all deductible running expenses, including:
- electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
- the decline in value and repair of capital items, such as home office furniture and furnishings
- cleaning expenses
- your phone costs, including the decline in value of the handset
- your internet costs
- computer consumables, such as printer ink
- the decline in value of a computer, laptop or similar device.
Which method should I use?
This will depend on the amount of your actual running expenses and whether you have kept your receipts for phone, internet, stationery etc. The fixed rate method also requires you to calculate the work related portion of phone, internet and related computer/laptop costs. This would require you to keep a log of your use over a 4 week period to enable a portion for work use to be calculated and used for the full period you worked from home.
If your employer is paying for most items such as your phone costs, computer costs, internet etc, the shortcut method does not require you to actually incur these costs and therefore may be the better method.
Your accountant will be able to calculate the best method for you. However, you need to ensure you have kept your records.
What records do I need to keep?
To use the shortcut method you need to keep a record of the hours you worked at home. This could be timesheets or diary notes.
To use the direct method:
- You need to keep a log for 4 weeks in relation to your phone costs, internet use, computer use, etc to enable a private and work related portion to be calculated and used for the whole period
- Keep receipts of expenses incurred
- Keep a record of hours you worked at home e.g. timesheets or diary notes
- You must have spent the money, you cannot claim for costs/items that are provided by your employer or if you have been reimbursed by your employer