Work from Home Expenses You Can Claim
With more businesses allowing employees to work remotely, from their homes, during Covid-19, questions are arising around what expenses can be claimed, and what records need to be maintained in preparation for tax time.
The Australian Tax Office (ATO) has updated information around work-from-home expenses, anticipating a larger-than-usual number of claims as thousands of people have had to set up home offices to keep working through the global health crisis. To claim a deduction for working from home, all of the following must apply:
- You must already have spent the money
- The expense must be directly related to earning your income
- You must have a record to prove it.
You cannot claim a deduction for items provided by your employer or if you have been reimbursed for the expense.
If you are not reimbursed by your employer, but instead receive an allowance to cover your expenses when you work from home, you:
- Must include this allowance as income in your tax return
- Can claim a deduction as outlined in this fact sheet.
Expenses You Can Claim
If you work from home, you can claim a deduction for the additional running expenses you incur. These include:
- Electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- Cleaning costs for a dedicated work area
- Phone and internet expenses
- Computer consumables (for example, printer paper and ink) and stationery
- Home office equipment, including computers, printers, phones, furniture and furnishings - you can claim either the:
- full cost of items up to $300
- decline in value for items over $300.
Tracking these expenses can be challenging, so the ATO will accept a temporary shortcut method of calculating additional running expenses from 1 March 2020 until at least 30 June 2020. This may be extended, depending on when work patterns start to return to normal.
Expenses You Can’t Claim
If you are working from home during COVID-19 only, you:
- Cannot claim occupancy expenses such as mortgage interest, rent and rates
- Cannot claim the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you at work.
Calculating Running Expenses
There are three ways you can choose to calculate your additional running expenses:
- Shortcut method ─ claim a rate of 80 cents per work hour for all additional running expenses
- Fixed rate method ─ claim all of these:
- o a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture
- o the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery
- o the work-related portion of the decline in value of a computer, laptop or similar device
- Actual cost method ─ claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.
For more information on how to calculate and claim a deduction under the actual cost method or fixed rate method see Home office expenses.
“The ATO will be keeping a close eye on home office claims this year, so make sure you hold onto those receipts and keep some records for your home office hours,” said David Block+, Associate and Representative of Hood Sweeney Accounting & Business Advisory.
“Your accountant can always help you manage your claim under either method for calculating running expenses,” he said.
You can claim a deduction of 80 cents for each hour you work from home due to COVID-19 as long as you are:
- Working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls
- Incurring additional deductible running expenses as a result of working from home.
You do not have to have a separate or dedicated area of your home set aside for working, such as a private study.
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.
If you use the shortcut method to claim a deduction for your additional running expenses, you cannot claim a further deduction for any of the expenses listed above.
You must keep a record of the number of hours you have worked from home as a result of COVID-19, for example timesheets, diary notes or rosters.
Records You Must Keep
If you use the shortcut method, you only need to keep a record of the hours you worked at home, for example timesheets or diary notes.
If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses.
Hood Sweeney Accounting & Business Advisory can assist with more information on what can be claimed, the records required, and how to file these expenses. Please ring on 1300 764 200 or send an email and we will be in touch.
+David Block is a Representative of Hood Sweeney Accounting & Business Advisory AFSL No. 485569, ABN 30 007 696 595