Working From Home

Due to COVID-related government policies, many employees are now working from home on a regular basis. As you may or may not be aware, there are tax deductions available for running and other expenses associated with an employee’s work from home activities. As with many areas of tax, the fine details can become quite complex, but the following overview will cover everything you need to know to get started and gather the necessary information to optimize your claim come tax time.

There are two broad types of claims for working from home expenses, the statutory/fixed rate method and the actuals method. There is also a new, COVID-specific shortcut method. All are covered below.

Before we begin, please note that if you wish, you can review the ATO’s full guidelines here. The information below is directed at employees who normally work in an office but are now working from home.

Eligibility

A brief reminder that the three general tax deduction principles apply to these expenses, namely:

  • The expense must be for work
  • The money must actually have been spent
  • You were not reimbursed by your employer

It is also important to note that the rules change depending on whether you have a ‘dedicated workspace’ such as an office or study. Please refer to the ATO’s table below.

Expense

You do have a work area

You do not have a work area

Cost of using a room's utilities such as gas and electricity

Yes

Yes

Work-related phone costs

Yes

Yes

Decline in value (depreciation) of office plant and equipment such as desk, chairs and computers

Yes

Yes

Decline in value (depreciation) of curtains, carpets and light fittings

Yes

No

Occupancy expenses such as rent, mortgage interest, insurance and rates

No

No

Shortcut Method

Claims under this method are made at $0.80 cents per hour worked. The relevant expenses covered by this claim are highlighted in green below. This is currently only applicable to hours worked from 1st March 2020 to 30th June 2020.

Expense

What do I need to do?

  • Utilities: Gas & Electricity

  • Furniture & Equipment costing <$300

  • Furniture & Equipment costing >$300

  • Cleaning

  • Home phone & internet expense

  • Printer Ink, paper & other stationery

  • Computers & other office equipment

Keep track of your hours worked from home.

Statutory / Fixed Rate Method

Claims under this method are made at $0.52 cents per hour worked. The relevant expenses covered by this claim are highlighted in green below. Anything not highlighted is claimed separately.

Expense

What do I need to do?

  • Utilities: Gas & Electricity

  • Furniture & Equipment costing <$300

  • Furniture & Equipment costing >$300

  • Cleaning

Keep track of your hours worked from home.

Home phone & internet expense

Keep a 4-week diary of the work & private usage

Printer Ink, paper & other stationery

Keep a 4-week diary of the work & private usage

Computers & other office equipment

Keep a 4-week diary of the work & private usage of each item

Helpful note: For expenses that require a 4-week diary, the simplest way to keep track of business vs private usage is to track the number of business hours of usage for the expense in question, and estimate the total hours of usage. Business / Total will then provide you with business-related % of use.

Actuals Method

Please note that if you choose this method for any expense also covered by the statutory or shortcut method, you must choose it for all expenses in the statutory /shortcut method.

Refer to the table of expenses below, and what you need to do to support them. Remember that your eligibility to claim certain expenses is determined by the dedicated workspace guidelines listed above.

Expense

What do I need to do?

Utilities: Gas & Electricity

Refer to your utilities bills, and apportion them according to the ratio of the floor space of the office, to the total floor space of your home.


Keep a 4-week diary of the work & private usage of your home office space.

Furniture & Equipment costing <$300

Keep a 4-week diary of the work & private usage of tach item

Furniture & Equipment costing >$300

Work out the approximate floor space area of the home office area, and determine its proportion of the total floor space of your home


Keep a 4-week diary of the work & private usage of each item

Home phone & internet expense

Keep a 4-week diary of the work & private usage

Printer Ink, paper & other stationery

Keep a 4-week diary of the work & private usage

Computers & other office equipment

Keep a 4-week diary of the work & private usage of each item

Expenses that are NOT claimable include:

  • Rent / mortgage payments
  • Home insurance
  • Council rates
  • Strata fees

Wrapping Up

Hopefully the above has given you a general sense of what is claimable for you, and how to go about supporting & tracking. Best practice when making any claim, as always, is to keep your receipts and diaries stored somewhere in the event that the ATO every queries one of your returns.

Which method is best for you will depend greatly on your specific circumstances, particularly the private vs. business use of certain expenses. In general, the statutory method is a good trade-off of convenience against the total claim value. The shortcut method is best for complete convenience, but because it covers expense categories that are frequently the source of a higher claim (high-business use claims on equipment like computers, tablets, or higher home-internet costs), the final claim result may not be as favourable as the statutory method.

For many people, there will be a shift in usage patterns from pre-COVID (1 July 2019 to 29 Feb 2020), to post-COVID (1st March 2020 to 30th June 2020) home office activity. In these cases, we recommend updating / keeping separate diaries and a list of hours work from home for the period after 1st March 2020, while your normal usage pattern would apply to the period before.

If you have any follow up questions, please reach out to your accountant, we’re here to help.