Home Office Running Expenses: The Busy Person’s Guide to Tax Deductions

by | Apr 7, 2020

Home office running expenses became one of the top concerns of many since work-from-home became the new normal for corporate Australia. With the COVID-19 threat and the global focus shifting to health and safety, a large number of the employee populace have been working from home, leading to numerous questions on tax and tax deductions from employees and employers alike, particularly on what they can and can’t claim.

In response, the Australian Taxation Office has released new tax guidelines and one of these is the “Shortcut Method” for computing additional work-from-home expenses as a result of the pandemic.

In contrast to the existing method where expenses and their deductibility require more substantial analysis and solid proof of records, the Shortcut Method for additional home office running expenses is very straightforward. The Shortcut Method makes the process simpler and easier for taxpayers to claim tax deductions.

Home Office Running Expenses

Here’s everything you should know:

  1. WFH – 1 March – 30 June 2020
    The ATO will allow individuals to claim a deduction for all running expenses incurred during the period 1 March 2020 to 30 June 2020, based on a rate of 80 cents for each hour an individual carries out genuine work duties from home.

Working from home deductions for the above period includes:

✔  Electricity expenses associated with heating, cooling and lighting the area at home, which is being used for work
✔ Cleaning costs for a dedicated work area,
✔ Phone and internet expenses,
✔ Computer consumables (e.g., printer paper and ink) and stationery,
✔ Depreciation of home office furniture and furnishings (e.g., an office desk and a chair),
✔ Depreciation of home office equipment (e.g., a computer and a printer).

Please note that under the 80 cents per hour method, separate claims cannot be made for any of the above running expenses (including depreciation of work-related furniture and equipment). As a result, using the 80 cents per hour method could result in a claim for running expenses being lower than a claim under the existing arrangement.

WORKING FROM HOME – ELIGIBILITY GUIDELINES | 80 CENTS/HOUR

(a) there is no requirement to have a separate or dedicated area at home set aside for working (e.g., a private study)

(b) multiple people living in the same house could claim under this method (e.g., a couple living together could each individually claim running expenses they have incurred while genuinely working from home, based on the 80 cents per hour method)

(c) an individual will only be required to keep a record of the number of hours worked from home because of the Coronavirus, during the above period. This record can include timesheets, diary entries/notes or even rosters.

WORKING FROM HOME EXPENSES | PRE COVID-19 GUIDELINES

Working from home running expenses that are incurred before 1 March 2020 (and/or incurred from this date where an individual does not use the 80 cents per hour method) must be claimed using existing claim arrangements. Broadly, these existing claim arrangements require:

  • an analysis of specific running expenses incurred because of working from home
  • more onerous record-keeping (e.g., the requirement to provide receipts and similar documents for expenses being claimed
  • the requirement to maintain a time usage diary or similar record to show how often a home work-area was used during the year for work purposes).

Need clarification? – be sure to mention this to your Senior Client Manager before we commence your tax return in the upcoming months! Contact us today!

 

 


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Chan & Naylor
Chan & Naylor

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