As more people are now working from home many are wondering what can and can’t be claimed and what records they need to keep. The following information, plus some tools and fact sheets, will help but your accountant and financial planner can help you the most with this question.
What tax deductions can you claim?
If you work from home, you can claim the work-related proportions of household costs such as:
Ideally, you should have a specific room set aside as a home office. If you are using a room with a dual purpose (e.g. dining room), or a room shared with others (e.g. lounge room) you can only claim the expenses for the hours you had exclusive use of the area.
The impact of the COVID-19 pandemic has led the Australian Taxation Office to introduce a ‘special’ method for claiming ‘working from home expenses’.
This special new arrangement will apply from March 1 to June 30 2020 and will allow people to claim a rate of 80 cents per hour for all relevant expenses.
Other important aspects of this new method are that multiple people living in the same house can claim this new rate individually, and it is no longer a requirement to have a dedicated work from home area in order to claim.
If you choose to use this shortcut method, all you need do is keep a record of the hours you worked from home as evidence of your claim.
It is important to remember the dates to which this special new arrangement apply. Claims for working from home expenses prior to March 1 can’t be calculated using the shortcut method.
This new shortcut arrangement does not stop people from making a working from home claim under the existing arrangements, which involves calculating all or part of your running expenses.
The ATO will review the special arrangement for the next financial year as the COVID-19 situation progresses.
Pre 1-3-2020, post 30-6-2020 methods.
Keep a diary to work out how much of your household running expenses relate to doing work in your home office. The diary needs to detail the time you spend in the home office, compared with other users of the home office. Keep your diary record for a representative four-week period. The ‘work-use proportion’ can then be used to determine your work-related claim, for whatever period of time they are required by the Government or Employer regulation to work from home. Of the two methods this usually produces the larger deduction, but the record-keeping requirements are more stringent.
It may well be that you are already working from home from time to time but that the amount of remote working will spike over the next few weeks or months. If that’s the case, keep a separate diary for the period of your ‘corona-induced’ home working to justify the larger claim for this period – but don’t try to apply this larger work-related proportion to the whole year!
Alternatively, you can use a fixed rate of 52 cents per hour for home office expenses for heating, cooling, lighting and the decline in value of furniture, instead of keeping details of actual costs. You just need to keep a record of the number of hours you use the home office and multiply that by 52 cents per hour.
In addition to claiming 52 cents per hour, you can also make a separate claim for:
Finally, a word of warning: it is quite common for people to have insufficient documentation to support a home office claim, particularly around the proportionate split between business use and personal use so be sure to keep records.
The ATO have calculators (at present only the 2018/19 is available) available to assist you with calculating these deductions and links below for more information.
Based on ATO information and resources.