What things do I need in order to have tax deductions at the end of financial year due to working at home because of Covid-19? Will it just adjust with my transport costs, or if I had to do some arrangements at home would that be beneficial?
Hannah, Claremont, WA
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Thanks so much for your question. I bet a lot of people will be confused about this and would like to know exactly what they can claim.
I am not quite clear with what you mean with doing some arrangements at home, but assume you had to clear a space in your home to make it a dedicated workspace.
The ATO acknowledges you may incur direct expenses while working from home and you can claim the actual costs if all of the following criteria have been met:
- You must have spent the money
- The expense must be directly related to earning your income
- You must have a record to prove it
- You are not reimbursed for these expenses by your employer
In addition, you can also claim running expenses such as:
- 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, like computers and furnishings up to $300 per item. If the cost is higher you need to depreciate the item.
If you believe that you do not incur that much in extra expenses or it is all a bit too hard to work out, then the ATO will accept a temporary simplified method (called the shortcut method) when calculating additional running expenses for the period starting 1 March 2020 until at least 30 June 2020.
Under this shortcut method you can claim $0.80 per work hour. This method is probably best when you do not have a dedicated working space and do not have a lot of the extra expenses listed above.
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.
And finally, there is another option of claiming called the Fixed Cost method.
Under this method you can claim a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture plus:
- the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery, and
- the work-related portion of the decline in value of a computer, laptop or similar device.
EXPENSES YOU CAN’T CLAIM
If you are working from home only due to COVID-19, you cannot claim occupancy expenses such as mortgage interest, rent and rates. Food expenses, like lunches, coffee or tea are not deductible either.
Hanna, you also mentioned the cost of transport. Cost of travel between home and your workplace is generally not tax deductible, but if the nature of your work requires you to travel to different locations then you may be able to claim for that travel. There are different methods of claiming these deductions. At the moment I have insufficient information to assess the deductibility of your transport costs. I suggest you discuss these options with your accountant.
I trust that my response this will give you some answers on what you can claim as deductible expenses while working from home.
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