Are you eligible for a working from home tax deduction?

Life has changed very dramatically and at a previously unthinkable pace. One of the biggest changes has been that a large portion of Australia’s workforce has transitioned from commuting to an office to working from home. As a result, employees have been spending more than usual on home office expenditure. Does this mean they are eligible for a tax deduction claim against this increased expenditure?

Home office expenses tax deduction

Before 1 March 2020 there were two options available to employees seeking home office-related tax deductions: the actual cost method, or the fixed rate per hour method. In response to the large shift to working from home that has taken place, the ATO has announced a third deduction possibility (the shortcut method), which is applicable from 1 March 2020 to 30 June 2020. The criteria that must be satisfied is as follows:

• The expenses must have been incurred by you.
• The expenses have not been reimbursed by your employer.
• The expenses must be in relation to your income earning activity.
• You must have a record as evidence.

Running costs that could be claimed as a tax deduction are as follows:

• Printer-related costs incurred from working from home.
• Communication expenses – phone and internet.
• A decline in the value of home office equipment: computers, printers, furniture, phones, etc.
• Any increase in electricity costs relating to lighting, heating, cooling, or cleaning your home resulting from working from home.

Shortcut method for tax deduction on home office expenses

The ATO has provided a new shortcut rate of 80 cents per hour on additional running expenses incurred from 1 March 2020. No further deduction may be claimed on any items in addition to the per-hour allowance if the shortcut method is used from 1 March 2020, due to the fact that the rate is intended to cover all work-related home office expenses. This shortcut method only applies to you if you:

• Are working from home. Importantly, it does not include those who are on leave or who have been stood down, or in a business’ case, have permanently ceased operations.
• Have incurred additional expenses as a result of working from home due to COVID-19.

It is essential that taxpayers keep a record of the hours worked from home during the period 1 March 2020 to 30 June 2020. There will be a COVID hourly rate narration next to the deduction in the tax return.

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Disclaimer

Any advice contained in this document is general advice only and does not take into consideration the reader’s personal circumstances. Any reference to the reader’s actual circumstances is coincidental. To avoid making a decision not appropriate to you, the content should not be relied upon or act as a substitute for receiving financial advice suitable to your circumstances.