New Simplified Method for Working From Home Tax Deductions During COVID-19

Posted on 7th April 2020 by Kelsi Keep

Due to the COVID-19 outbreak there has been an increase in the number of people working from home, to assist taxpayers the ATO have announced a new Simplified Method for calculating your working from home tax 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 cannot claim a deduction for items provided by your employer or if you have been reimbursed for the expense.

There are three ways you can choose to calculate your additional running expenses:

Simplified Method

You can claim a deduction of 80 cents per hour you work from home due to COVID-19 between 1 March 2020 and 30 June 2020 as long as you are:

• working from home to fulfil your employment duties (i.e. you are not carrying out only minimal tasks such as occasionally checking emails or taking calls); and
• incurring additional deductible running expenses as a result of working from home

You do not have to have a separate dedicated area of your home set aside for working to claim this.

The shortcut method rate covers all deductible running expenses, including:

• electricity & gas for lighting, cooling or heating and running electronic items used for work
• 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
• stationery
• the decline in value of a computer, laptop or similar device.

If you use this method you cannot claim a further deduction for any of the expenses listed above.

You must keep a record such as timesheets, diary notes or rosters to show the number of hours you have worked from home as a result of COVID-19.

If you are working from home only due to COVID-19, you cannot claim:

• occupancy expenses such as mortgage interest, rent and rates
• general consumables your employer may otherwise have provided you with at work, such as coffee, tea, milk, etc.

The ATO will review extending the period as the COVID-19 situation progresses.

Fixed Rate Method

You can claim a deduction for:

• a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture,
• 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.

To claim using this method, 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 then 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.

You need to separately work out all other work area expenses, such as:

• phone and internet expenses
• computer consumables and stationery
• decline in value on computers or other equipment.

 Actual Cost Method

You can claim the actual work-related portion of all your running expenses if you have a dedicated work area, which you need to calculate on a reasonable basis.

Further information on what is considered reasonable can be found using the following link:

https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Home-office-expenses/#Actualexp

We are here to help

Trying to think of everything you need to do keep your team and customers safe and healthy right now as well as run your business is tough.

We will continue to keep you informed of all government stimulus and other measures and how they apply to your business and are here at any time of the day to give you advice on your business continuity plans and cashflow.

Please call us on (08) 9316 7000 if there is anything we can do to help you.

If you need us outside of work hours, please call one of our Directors:

Andrew Sullivan on 0407 680 698
Chris Grieve on 0417 967 539
Ashley Dawson on 0438 014 318

We are here for you and together we will all get through this.

We will all come out the other side with more resilience, more compassion and more empathy.  Until we do, please look out for each other.