Tax Deductions you can Claim while Working from Home

Many Aussies have found themselves working from home due to the coronavirus lockdown. Whether you’re working from home just during the lockdown period or you’re planning to continue working from home in some capacity once lockdown restrictions ease, it’s important to know what you can legitimately claim as a deduction on your tax return.

While the ATO has guidelines regarding what you can claim as working from home expenses (which we’ll get to shortly), some minor changes have been brought in due to the COVID-19 lockdown.

First, you are no longer required to have a dedicated home office or study to make a claim. Working from the kitchen table, your couch or even your bed is now allowed.

Second, the ATO is offering a shortcut method for calculating your home office expenses. You can now claim 80 cents per hour for all running expenses, rather than having to calculate costs for specific running expenses. All you need to claim this are your timesheets.

While the increase from the standard 52 cents per hour does seem like a good deal, it may not be the best deduction you can get come tax time. If you choose not to use the new arrangement, you can still calculate and claim your working from home expenses under the ATO’s pre-existing guidelines.

If you had a work from home arrangement before 1 March 2020, you will need to use one of the ATO’s other pre-existing methods to calculate your deduction for the period prior to the COVID-19 lockdown.

Please note: The shortcut method will only apply from March 1 to June 30, 2020. The ATO is planning to review the arrangement for the next financial year as the COVID-19 situation progresses.

Tax Return Bentleigh

What you can claim

Whether you’ve only been working from home during the coronavirus lockdown period, or you regularly work from home, you are entitled to claim deductions for expenses related to work.

It should be noted that this only applies to employees who work from home. If your home is your principal place of business, you should refer to the ATO’s guidelines on running your business from home.

When working from home, you’re entitled to claim running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses.

How do you claim?

There are three ways of claiming home offices expenses. These are:

  • The shortcut method (discussed above)
  • The fixed rate method (52 cents per hour)
  • The actual cost method

Each method has its own record keeping requirements and working criteria that must be adhered to.

The fixed rate method

For the fixed rate method, you can claim a deduction of 52 cents per hour for work-related running expenses. This includes the decline in value of home office furniture and furnishings, electricity and gas, and the cost of repairs to home office equipment and furnishings. You’re required to have a dedicated work area, such as a home office or study to claim using this method.

To claim this way, you must keep records of your hours worked and a diary that shows your representative work patterns over a four-week period. This period can be applied across the entire year to determine your total deduction.

This method doesn’t include phone and internet expenses, computer consumables and stationery and the decline in value of equipment like phones and computers. These expenses must be calculated separately.

The actual cost method

Under the actual cost method you are able to claim additional expenses that you can’t claim under the other methods. This may include the following expenses:

  • Electricity and gas
  • Decline in value of furniture and furnishings
  • Decline in value of equipment like phones and computers
  • Phone expenses
  • Internet expenses
  • Cleaning (if you use a dedicated area for working)
  • Computer consumables and stationery

As you might expect, claiming deductions under the actual cost method is more complicated. Visit the ATO website for full details for claiming under the actual cost method.

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