The rise of COVID-19 has seen a surge in people working from home which has resulted in a lot of people asking if they’re eligible for work from home tax deductions. Unless your boss has provided you with an allowance to cover your home expenses, you should be able to claim all the extra bills you’ve accumulated working from home.
However, the ATO has warned that they’ll be keeping a close eye on work related tax claims this year, and that those making false claims could face fines – even if it’s not deliberate fraud. If the ATO does suspect that a claim is incorrectly calculated, the claimant would require physical proof of receipts, and detailed documentation with dates to substantiate the work-related expenses. Given the risks involved with claiming using the Shortcut Method, it’s recommended that you enlist in the help of a small business accountant to avoid potential penalty.
If you’re wondering ‘what can I claim if I work from home?’, we recommend reading the following guide:
Work from home tax deductions
What can I claim if I work from home?
Simply put, running expenses cover the costs of equipment and utilities used to perform work tasks. This can include up to $300 for home equipment or office furniture, electricity required to run laptops, lighting, heating, cooling, and internet and phone bills. Any repair costs and decline in value of equipment can also be added to your work from home tax deductions.
- Electricity expenses consumed during work hours
- Cleaning costs office area
- Stationery, computer ink, paper etc.
- Phone and internet (percentage estimated to be used for work)
- Home office equipment, including computers and office furniture (nothing over $300)
ATO three golden rules for working from home tax claims
- Employees must have spent their own money and have not been reimbursed by employer
- Proof of hours worked such as timesheets, and receipts or bills incurred because of working from home
- If expenses are a mix of work and private use, you can only claim the portion used for business
Working from home tax claims: The Shortcut Method
A new initiative from the Australian Tax Office, the Shortcut Method allows you to claim 80 cents per hour of you working from home – which makes it seem a lot more desirable than the fixed rate method, which is 52 cents per hour. However, the Shortcut Method may result in you getting your tax refund cut short as it doesn’t take into consideration itemised expenses.
If you work a 38 hour week from home, you can claim 0.80 x 38 x 16 weeks = $486.40
With the fixed rate method, you can account for office expenses such as phone bills, electricity and internet usage:
- 0.52 x 38 x 16 weeks = $316.16
- 50% of $80 phone bill x 4 months = $160
- 50% of $100 internet bill x 4 months = $200
- 50% of $120 electricity bill x 4 months = $240
Total home claim: $916.16
However, this is where it gets tricky. If you wish to claim using the Shortcut Method, you can only claim expenses between Mar 1st to September 30th. If you worked from home prior to this method being introduced, you will have to claim either the fixed rate or actual cost method. If you choose to combine methods, you’ll have to produce your decline in value calculations, proof of work related use of assets and purchase receipts of equipment.
If you find yourself feeling a little bit confused, it might be worth talking to a business tax accountant to work out what work from home tax deductions you can claim. Get in contact with a Taggart & Partners tax financial adviser about your business tax planning & reduction needs today.