HOME OFFICE EXPENSES

If you’re an employee who works from home, you may be able to claim a deduction for expenses you incur relating to that work. These can be additional running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses.

If your home is your principal place of business, you should refer to running your business from home.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home.

Calculation methods

There are three ways of calculating home office expenses depending on your circumstances. The methods are the:

  • Shortcut method (80 cents) – only available 1 March to 30 June 2020
  • Fixed rate method (52 cents)
  • Actual cost method

You must meet the record keeping requirements and working criteria to use each method.

Shortcut method

We have introduced a shortcut method to simplify how you calculate your deduction for working from home. This method is temporary and only available for the period 1 March to 30 June 2020. All employees working from home in this period can use this method.

Using this method, you can claim 80 cents per hour for each hour you work from home during the period 1 March to 30 June 2020.

You can choose to use this rate if you:

  • are working from home to fulfil your employment duties, not just carrying out minimal tasks such as occasionally checking emails or taking calls
  • have incurred additional running expenses as a result of working from home.

The shortcut method covers all of your work from home expenses, such as:

  • phone expenses
  • internet expenses
  • the decline in value of equipment and furniture
  • electricity and gas for heating, cooling and lighting.

If you use this method, you can’t claim any other expenses for working from home.

You don’t need to have a dedicated work area to use this method. However, you must keep a record of the number of hours you have worked from home. This could be a timesheet, roster, a diary or documents that set out the hours you worked from home.

You don’t have to use the shortcut method, you can choose to use one of the existing methods to calculate your deduction. You can use the method or methods that will give you the best outcome as long as you meet the working criteria and record keeping requirements for each method.

If you had a work from home arrangement before 1 March 2020, you will need to use one of the existing methods to calculate your deduction for the period 1 July 2019 to 29 February 2020.

The shortcut method includes decline in value of all items. If you choose to use this method there is no requirement to separately calculate the decline in value of equipment or depreciating assets. However, as you may combine methods or use a different method in later years it’s important to keep the:

  • purchase receipts for depreciating assets or equipment you use when working from home
  • records of how you calculated your work-related use of the asset
  • your decline in value calculations.

Fixed rate method

You can claim a deduction of 52 cents for each hour you work from home for the work-related expenses you incur for additional running expenses. The fixed rate covers all expenses you incur for:

  • the decline in value of home office furniture and furnishings – for example, a desk
  • electricity and gas for heating, cooling and lighting
  • the cost of repairs to your home office equipment, furniture and furnishings.

To claim using this method, you must keep records of either:

  • your actual hours spent working at home for the year
  • a diary for a representative four-week period to show your usual pattern of working at home.

You can apply the four-week representative period across the remainder of the year to determine your full deduction amount. However, if your work pattern changes you will need to create a new record.

To use this method, you need to have a dedicated work area, such as a home office when you work from home.

This method doesn’t include the following, so you will need to separately calculate your work-related use for:

  • phone expenses
  • internet expenses
  • computer consumables and stationery – such as ink
  • decline in value of equipment – such as phones, computers and laptops.

To claim the work-related portion of these expenses you must have records such as:

  • receipts or other written evidence that shows the amount spent on expenses and depreciating assets you purchased
  • phone accounts identifying your work-related calls and private calls to work out your percentage of work-related use for a representative period
  • a diary that shows
    • a representative four-week period of your usual pattern of working at home
    • any small expenses ($10 or less) that you can’t get a receipt for totalling no more than $200
    • your work-related internet use
    • the percentage of the year you used depreciating assets exclusively for work.

Watch: Claiming for a computer, phone or other electronic device as a work-related expense

Actual cost method

Under the actual expenses method, you can claim the additional running costs you directly incur as a result of working from home. This may include the following expenses:

  • electricity and gas for cooling, heating and lighting
  • the decline in value of home office furniture (desk, chair) and furnishings,
  • the decline in value of phones, computers, laptops or similar devices
  • phone expenses
  • internet expenses
  • cleaning (if you use a dedicated area for working)
  • computer consumables and stationery – such as ink

If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. For example, if the area you use for work is a common area of the home such as a lounge room and that area is being used by other members of your household for another purpose (such as, family members watching television) at the same time you’re working, you won’t be incurring any additional costs for lighting, heating or cooling as a result of working in that room.

To calculate the work-related portion of your actual expenses you must have records. You can:

  • keep a record of the number of actual hours you work from home during the income year
  • keep a diary for a representative four-week period to show your usual pattern of working at home
  • work out the decline in value of depreciating assets and
    • keep receipts showing the amount you spent on the assets
    • show the percentage of the year you used those depreciating assets exclusively for work – you can claim for the portion of the decline in value that reflects your work-related use of the depreciating assets
  • work out the cost of your cleaning expenses (if you have a dedicated work area) – for example, a room set up as a home office, by adding together your receipts and multiplying it by the floor area of your dedicated work area (floor area of the dedicated work area divided by the whole area of the house as a percentage) – your claim should be apportioned for any
    • private use of your home office
    • use of the home office by other family members
  • work out the cost of your heating, cooling and lighting by working out the following
    • the cost per unit of power used – refer to your utility bill for this information
    • the average units used per hour – this is the power consumption per kilowatt hour for each appliance, equipment or light used
    • the total annual hours used for work-related purposes – refer to your record of hours worked or your diary for this information.
  • work out the cost of your phone or internet plan expenses – where you receive an itemised bill, you need to determine your percentage of work use over a four-week representative period.
  • work out the cost of computer consumables and stationery by keeping receipts for the items purchased.

You must take into account other members of your household when you work out your expenses. If a member of your household is using the same area of the house or the same service when you’re working, you must apportion your expenses accordingly.

To claim a deduction for an asset that cost $300 or more, you need to calculate the decline in value for both the period you:

  • owned the assets during the income year
  • used the assets for work-related purposes.

You can use the depreciation and capital allowances tool to calculate your deduction for the decline in value of equipment, furniture and furnishings that cost more than $300, use the depreciation and capital allowances tool to work this out.

You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year. It’s a fast, easy way to capture information on the go by taking and uploading photos of receipts.

Expenses you can’t claim

There are some expenses you can’t claim a deduction for as an employee. Employees who work at home can’t claim costs:

  • for coffee, tea, milk and other general household items your employer may otherwise have provided you with at work
  • related to children and their education including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
  • that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone.

Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.

Records for change in circumstances

Regardless of the method you choose to use to calculate your expenses for working from home, you will need to have records.

If your circumstances change part way through the income year – for example, your usual pattern of work from home changes – you will need to keep separate records to show this change.

If you use the four-week representative period to calculate your usage over the income year, you will need to either:

  • complete a new four-week representative period to show your usage in your new circumstances
  • keep separate records for the period your circumstances changed.

For example, if you usually work from home one day a week and due to an emergency situation such as COVID-19 or bush fires you’re required to work from home for a period, you will need to keep separate records for both situations. This includes:

  • the actual hours you’ve worked from home due to the emergency situation
  • your usual working from home arrangements.

Your four-week representative period will no longer be valid in these circumstances.

Contact us

To contact our tax consultant to claim your deductions and advice at click on

Book Your Appointment

https://taxbook.com.au/

Ph 13 75 77 75

Disclaimer

This reading material was extracted from Australian Tax Office (ATO) website on 24 June 2020. This post and the information therein is for general information only and does not constitute legal, financial or taxation advice from PTB. Other requirements under tax law may apply and may change. If you wish to act on any of the material in this video, you should contact PTB for professional advice that takes into account your own specific circumstances.

Working from home during COVID-19

We understand that due to COVID-19 your working arrangements may have changed. If you have been working from home, you may have expenses you can claim a deduction for at tax time.

Tracking these expenses can be challenging, so from 1 March to 30 June 2020, we have introduced a temporary shortcut method. It’s a simple way to calculate these expenses with minimal record keeping requirements. We may extend this period, depending on when work patterns return to normal.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home.

Claiming a deduction

To claim a deduction for working from home, all of the following must apply:

  • you must have spent the money
  • the expense must be directly related to earning your income
  • you must have a record to prove it.

This means you can’t 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 receive an allowance from them to cover your expenses when you work from home, you:

  • must include this allowance as income in your tax return
  • can claim a deduction for the expenses you incur.

Expenses you can claim

If you work from home, you will be able to claim a deduction for the additional 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.

Expenses you can’t claim

If you are working from home, you can’t claim:

  • the cost of coffee, tea, milk and other general household items your employer may otherwise have provided for you at work
  • costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
  • items that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone
  • time spent not working, such as time spent home schooling your children or your lunch break.

Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.

Calculating your expenses

There are three ways of calculating home office expenses depending on your circumstances. The methods are the:

  • Shortcut method (80 cents) – only available 1 March to 30 June 2020
  • Fixed rate method (52 cents)
  • Actual cost method

You don’t have to use the shortcut method. You can choose to use one of the existing methods to calculate your deduction. You can use the method or methods that will give you the best outcome, as long as you meet the criteria and record keeping requirements for each method..

Shortcut method

You can claim a deduction of 80 cents for each hour you work from home from 1 March to 30 June 2020 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
  • have incurred additional running expenses as a result of working from home.

The shortcut method doesn’t require you to have a dedicated work area, such as a private study.

The shortcut method covers all additional 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 including capital items that cost less than $300
  • cleaning expenses
  • your phone costs, including the decline in value of the handset
  • your internet costs
  • computer consumables, such as printer ink and stationery
  • the decline in value of a computer, laptop or similar device.

You don’t have to incur all of these expenses to use the shortcut method, but you must have incurred additional running expenses in some of these categories when working from home.

If you use this method, you can’t claim any other expenses for working from home for that period.

When you are calculating the number of hours you worked from home, you need to exclude any time you took a break from working, for example the time you spent to stop and eat your lunch or to assist your children with home schooling.

You can calculate your deduction for additional running expenses using the shortcut method, with this formula:

  • Total number of hours worked from home between 1 March and 30 June 2020 × 80 cents.

If you use the shortcut method to claim a deduction in your 2019–20 tax return, include the amount at the other work-related expenses question in your tax return and include ‘COVID-hourly rate’ as the description. Remember, you can only use this method from 1 March to 30 June 2020.

For information on how to calculate your working from home expenses prior to 1 March, or if you also choose to use one of the existing home office expenses methods to calculate your deduction.

Records you must keep

You must keep a record of the number of hours you have worked from home. This could be a: expenses bills

  • timesheet
  • roster
  • diary, or
  • similar document that sets out the hours you worked.

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.

Contact us

To contact our tax consultant to claim your deductions and advice at click on

Book Your Appointment

Ph 13 75 77 75

Visit link for more information on Tax returns 2020

Disclaimer

This reading material was extracted from Australian Tax Office (ATO) website on 24 June 2020. This post and the information therein is for general information only and does not constitute legal, financial or taxation advice from PTB. Other requirements under tax law may apply and may change. If you wish to act on any of the material in this video, you should contact PTB for professional advice that takes into account your own specific circumstances.