Short-cut method for claiming home office running costs
Many of you are worried about whether you can claim home office running costs since the majority of the workforce are now forced to work from home. Well, now the ATO has recently announced a temporary short cut method to make it easier for all taxpayers to claim these deductions. *Refer to ATO’s Media release on 7th April 2020. The ATO announced that they will allow individuals to claim a deduction for all running expenses incurred during the period 1st March 2020 to 30th June 2020 based on a rate of 80 cents for each hour an individual carries out work duties from home.
Please note that this is the latest alternative method to claim running expenses. ATO’s 80 cents per hour method covers ALL running costs.
Running expenses include the following: Electricity expenses associated with heating, cooling and lighting the area at home which is being used for work. Cleaning costs for a dedicated work area. Phone and internet expenses. Computer consumables (e.g., printer paper and ink) and stationery. Depreciation of home office furniture and furnishings (e.g., an office desk and a chair). Depreciation of home office equipment (e.g., a computer and a printer). This means that, under the 80 cents per hour method, separate claims cannot be made for any of the above running expenses (including depreciation of work-related furniture and equipment). As a result, using the 80 cents per hour method could result in a claim for running expenses being lower than a claim under existing arrangements (including the existing 52 cents per hour method for certain running expenses).
According to the ATO’s announcement, under the 80 cents per hour method: (a) there is no requirement to have a separate or dedicated area at home set aside for working (e.g., a private study);
(b) multiple people living in the same house could claim under this method (e.g., a couple living together could each individually claim running expenses they have incurred while genuinely working from home, based on the 80 cents per hour method); and
(c) an individual will only be required to keep a record of the number of hours worked from home as a result of the Coronavirus, during the above period. This record can include timesheets, diary entries/notes or even rosters.
Working from home running expenses that are incurred before 1 March 2020 (and/or incurred from this date where an individual does not use the 80 cents per hour method) must be claimed using existing claim arrangements. Broadly, these existing claim arrangements require: an analysis of specific running expenses incurred as a result of working from home; and more onerous record-keeping (e.g., the requirement to provide receipts and similar documents for expenses being claimed, as well as the requirement to maintain a time usage diary or similar record to show how often a homework area was used during the year for work purposes).
Key points: Experts warn a new 80 cents per hour method to claim work-related expense tax deductions could result in lower returns Using the old method requires far more record-keeping and maybe harder to navigate for those working from home for the first time Whatever method Australians opt for, the claims need to be related to their work and must be backed by records. If you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim. So, come tax time, all you need to do when doing your tax return multiply $0.80 with the number of hours you worked from home, and file that under the category ‘Other work-related expenses’. Then you’ll get that amount back in your tax refund.
This special arrangement will be reviewed by the ATO for the next financial year according to how the coronavirus pandemic progresses.
Read scenario below from ATO for further understanding: 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, Bianca can claim the desk, chair, gas and electricity under the 52 cents per hour, but 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.
In conclusion, it’s best to speak with your trusted agent like The Tax Accountant to tailor fit the best advice for your specific situations.
Disclaimer: This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice