As many employees and businesses have migrated to working from home in the interests of employee safety as a result of the enforced Government shutdown, the Australian Taxation Office (ATO) has announced special arrangements this financial year due to COVID-19 to make it easier for people to claim working from home tax deductions for costs and expenses incurred due to remove work.

Maximise your working from home tax deductions

The ATO has released a short-cut method to more easily enable people working from home to more easily calculate running expenses that can be claimed as working from home tax deductions.

The short-cut method allows people to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.    Multiple people living in the same house can claim this new rate. For example, a couple living together could each individually claim the 80 cents per hour rate. The requirement to have a dedicated work from home area has also been removed.

This new simplified arrangement does not prohibit people from making a working from home claim under existing arrangements (see below).

Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method and must use the pre-existing working from home approach and requirements.

For more information on claiming running expenses, refer to the ATO’s website: Working from home tax deductions during COVID-19.

Working from home tax deductions for 1 March 2020 to 30 June 2020

There are three ways that you can choose to calculate your additional running expenses for the 1 March 2020 to 30 June 2020 period:

  1. claim a rate of 80 cents per work hour for all additional running expenses;
  2. claim a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture, plus calculate the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device;
  3. claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

The ATO is also reminding people that the three golden rules for deductions still apply. Taxpayers must have spent the money themselves and not have been reimbursed, the claim must be directly related to earning income, and there must be a record to substantiate the claim.

Working from home tax deductions prior to 1 March 2020

Claims for working from home expenses prior to 1 March 2020 should be calculated using the existing approaches and are subject to the existing requirements.

Records you must keep

If you use the simplified method, you only need to keep a record of the hours you worked at home, for example timesheets or diary notes.

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

Working from home expenses you can’t claim

If you are working from home only due to COVID-19, you:

  • cannot claim occupancy expenses such as mortgage interest, rent and rates
  • cannot claim the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work.

The ATO will review the special arrangement for the next financial year as the COVID-19 situation progresses.  If you have any further queries please do not hesitate to contact us.

More information:

ATO example

Bianca is an employee who works as a copywriter and editor. Bianca starts working from home on 16 March as a result of COVID-19 and replaces her face-to-face meetings with online video conferencing.

Bianca has just bought a new laptop, desk, chair and stationery. She also wants to claim some additional gas, electricity, phone and internet costs due to working from home.

Under the shortcut method, Bianca can now claim all her expenses under a rate of 80 cents per hour. All she needs is her timesheets.

Bianca can also decide to claim using existing working-from-home calculations. Under that method, she can claim the desk, chair, gas and electricity under the 52 cents per hour, but she would need to work out the decline in value of the laptop and calculate the work-related portion of the laptop, stationery, phone and internet.