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Working From Home Deductions | Tax Concessions to Support Your Personal Cash-Flow

It's no secret that COVID-19 and its impacts may have forever changed how we do business, both now and in the future. The arguable greatest change? Remote working and an employees' ability to work from home as a norm!

For many businesses, entering the brave new world of remote working and 'WFH' procedures has presented tremendous opportunity, whilst for others, the transition has been a little more daunting (and one of learning & adaptation).

In the immediate economic climate, 'working from home' will continue to play a vital part in business continuity and has become standard for the foreseeable future as we journey through this pandemic.

For individual employees, the mandated change has been a unique & exciting one, but it may have also resulted in unexpected additional expense.

To help provide clarity on tax deductions & the concession rules when working from home, we've provided a summary for individuals below:

What You May Be Able to Claim

When working from home, there may be a number of tax deductions / concessions you are entitled to claim. These deductions can include the following:

  • Work-related IT equipment - such as a computer, laptop, mobile phone (purchased up to the value of $300);
  • Work-related IT equipment (Costing over $300) - depreciation can be claimed on these items;
  • Home Phone & Internet Costs;
  • Mobile Phone Costs;
  • Utilities - such as gas, electricity, and water;
  • Consumables - such as paper, stationery, and cleaning materials;
  • Cost of Repairs to Office Equipment

It is important to note that "work-place essentials" milk, tea & coffee (which can typically be office supplied to employees by businesses) cannot be claimed as tax deductions.

Tax Concession Rules

To claim a deduction for working from home, there are three eligible criteria issued by the Australian Tax Office you must satisfy. We've highlighted these criteria below:

  1. You must have spent the money;
  2. The expense must be directly related to earning your income; and
  3. You must have a record to prove it (unless under the total expense amount threshold of $300)

As part of the WFH procedures implemented as a result of COVID-19, employers may have provided its employees with equipment. The ATO has advised that any equipment provided by employers cannot be claimed as a tax deduction, alongside anything previously reimbursed.

It is important to note that this is also standard outside of the COVID-19 pandemic impacts.

Calculation Methods / How to Claim

In response to COVID-19, the ATO has announced a special calculating method for use during the Coronavirus period. The newly-introduced 'Shortcut' method relates to the additional running & capital item expenses listed previously, incurred when working from home to fulful employment duties.

Under the method, individuals will be able to claim a concession of 80 cents per work hour from home for a temporary time-frame of 1 march 2020 - 30 June 2020.

Additionally, to provide further support, the 'Shortcut' method does not require a separate or dedicated 'home office' study, with the only record-keeping required pertaining to the hours worked from home (demonstrated by a timesheet or diary notes).

Pre-Existing Methods

Whilst the new method has been released in response to current circumstance, pre-existing calculating methods can still be utilised to claim a 'work from home' tax deduction. These two methods include:

Fixed-Rate Method
  • A rate of 52 cents per work hour for heating, cooling, lighting, cleaning, and the decline in value of office furniture;
  • The work-related portion of your actual costs of phone & internet expenses, computer consumables, stationery;
  • The work-related portion of the decline in value of a computer, laptop, or similar device.
Actual-Cost Method
  • Claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

 

Under these, in order to claim the full tax concession, individuals should have a dedicated 'home office' study or existing work-station. Where a multi-purpose room (such as a dining or lounge room) is utilised, you can only claim the expenses for the hours the area was used exclusively as your work-office.

For More Information

For more information on tax concessions available to those working from home, please contact the Archer Gowland office on (07) 3002 2699.

   
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