Since the start of the Covid-19 Pandemic in March 2020, many businesses have had to adapt to employees working from home. As such, many workers are now working from home full time, which means employees can claim tax deductions for their home office. If you are due to submit your tax return and have been working from home this financial year, you can claim expenses but there are limitations.
What you Can’t Claim
Unfortunately, there are certain things that you can’t claim on tax as the ATO process the current financial year tax returns. These include,
- Residence expenses such as rent or mortgage repayments/interest, rates, or water bills
- General groceries such as milk, tea, coffee, or sugar that your employer would provide in an office
- Equipment that your employer has provided such as a laptop, phone, or computer
- Items where you have been reimbursed for the purchase from your employer
- Items purchased for your child/children’s education such as laptops or tablets
As a registered tax agent in Melbourne, we can help you sort through your expenses if you have the receipts. The ATO is coming down hard on those who are trying to claim expenses they are not entitled to. So, it’s best to speak to a tax professional to avoid any issues. For sole traders or business owners who works from home, your expenses will be different.
Fixed-Rate or Actual Cost
If you are an employee working from home, there are two ways that you can claim home office deductions, fixed rate, or actual cost. The fixed-rate method applies to individuals who have a dedicated home office or work area and have additional running costs because you are working from home. Employees can claim a fixed rate of 52 cents per hour you have worked from home. This rate includes expenses that you may encounter including,
- Cleaning costs for your office
- Gas and electricity for lighting, heating, or cooling
- Depreciation of the value of home office furniture or equipment such as computers or work desks
If you are going to use the fixed-rate method, you must keep a record of the number of hours you work from home during a financial year.
The actual cost applies to individuals who want to claim a deduction of the actual expenses incurred as of working from home. Individuals who want to use this method calculate the expenses, you run up while you work from home. These include,
- Phone and internet
- Amenities: lighting, heating, or cooling
- Computer consumables including printer ink or anti-virus software
- Depreciation of assets such as computers, laptops, or office furniture
By using this method, you must have a copy of your receipts and calculate the cost of running your home office. Regardless of the deduction method you choose, it is best to speak to a tax accountant for the right advice and guidance.
This method is temporary, you can only use it to work out your deduction for work from home expenses:
- between 1 March to 30 June 2020 in the 2019–20 income year
- for the 2020–21 income year.
The shortcut method ends on 30 June 2021.
You can use this method if you:
- worked from home and incurred some additional running expenses as a result
- have a record of the number of hours you worked from home.
How it works
The temporary shortcut method simplifies how you calculate your deduction for working from home expenses.
Using this method, you:
- can claim 80 cents per hour for each hour you work from home
- can’t claim any other expenses for working from home, even if you bought new equipment.
The shortcut method covers all your working 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.
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 or any other working from home expense.
Book an Appointment with a Tax Specialist
As a registered tax agent in Nunawading, we want you to get the best tax return for the financial year. To book an appointment, call Tax Purpose today on 0430 106 073, and we’ll take care of your tax return.