Last Minute Working from Home Tax Deductions you don't want to miss this year!

COVID-19 means you may be eligible for more tax deductions than ever before. Has working from home unlocked new tax savings for you?

By Tony Nunes  |  15 Oct 2020

As a result of the COVID-19 Pandemic, the number of claims for home office expenses are set to skyrocket. Despite the crisis, the ATO will still expect you to only claim what you’re entitled to claim - meaning don't go into tax time expecting any freebies! 

If you are currently or have worked from home at all this past financial year, it’s good to know what you are entitled to. Remember that you are responsible for keeping detailed records to support any claim you make.

Reminder that tax returns are due October 31, 2020. This applies if you're lodging your tax return yourself for the 2019-20 financial year. If you use an accountant or tax agent to complete your tax return, the deadline is extended to as late as May 2021. 

The rationale behind claiming tax deductions is to offset the additional expenses you incur when working outside of a traditional work space. These expenses include but are not limited to: 

  • Electricity expenses associated with heating, cooling and lighting the area you're working in
  • Electricity expenses connected to powering and running items you are using for work 
  • Cleaning costs for a dedicated work area
  • Phone and internet expenses
  • Computer consumables and stationery e.g. printer paper and ink
  • With home office equipment, including computers, printers, phones, furniture and furnishings, you can either claim the: 
    • Full cost of the items up to $300
    • Decline in value (depreciation) for items over $300.

If you work from home and it is not your principal place of business, the deductions you claim are dependent on whether:

  • You have a dedicated work area
    • Do you have a dedicated room like a study which is set aside primarily or exclusively for work activities but isn't your principal place of business?
    • An example of this is having an office but working at home due to COVID-19
  • You do not have a dedicated work area
    • This means you do not have an area or room dedicated to work activities but are working at home for unforeseen reasons such as COVID-19

The following table sets out the tax deductions you may be able to claim based on your situation and office set up: 

Expenses

Home is principal workplace with dedicated work area

You work at home with no dedicated work area

Running expenses

Yes

No

Work-related phone & internet expenses

Yes

Yes

Decline in value of a computer (work related portion)

Yes

Yes

Decline in value of office equipment

Yes

Yes

Occupancy expenses

No

No

Running Expenses

The running expenses an employee can claim where there is a dedicated work area includes costs such as electricity, phone, decline in value of plant and equipment, cost of repairs to furniture and furnishings, cleaning costs and such costs as computer consumables (eg printer paper, stationery, etc).

If you work from home but do not have a dedicated work area, you will either not be entitled to claim running expenses or the value of your claim will be minimal. This because you'll only be able to claim the additional running expenses incurred as a result of working from home. 

Calculating your entitlement

There are two ways to calculate your running expenses:

Fixed rate per hour

The easiest method is to use the "rate per hour" method. This is where the ATO allows a flat rate of 52¢ per hour to cover home-office expenses without the need to keep details of actual costs. This method applies to expenses such as heating, cooling, lighting and the value of furniture. 

Note: You will need to keep track of the time you spend working from home or keep a diary for a representative four-week period to show your usual pattern of working at home. We highly recommended keeping a time sheet so that you can best track your time.

How you would calculate the time is: Time x $0.52¢ = Total Time

In addition to claiming the 52¢ per hour, you need to have evidence of any other expenses incurred for phones and the internet, computer consumables and stationery and for the depreciation of any computers or equipment. We recommend keeping a digital copy and record or all receipts and invoices - did you know you can use your iPhone notes app to scan? Apps like Genius Scan are compatible for both Androids and Apple. 

Actual expenses

The other method of claiming a deduction is to claim the actual running costs - this can only apply if you have a dedicated work area. To make a claim on an actual basis you must: 

  • Keep a record of the number of actual hours you worked from home for the year, or keep a diary for a representative four-week period to show your usual pattern of working at home;
  • Keep records of the assets acquired and the tax depreciation that you are entitled to claim;
  • Keep records of the cleaning expenses incurred and apportion it by the floor area of the dedicated work space;
  • Work out the apportioned cost of your heating, cooling and lighting expenditure.

Though this can be a little more time consuming, it is a lot more accurate. Laptops or phones provided by your employers while working at home cannot be claimed for tax purposes.

What happens if I don't have a dedicated work area? 

If you don't have a work area or home office, your expenses for heating, cooling and electricity should be calculated by determining the actual cost of running each unit you used per hour and multiplying that by the hours you worked from home. The amount of the additional expense is generally small. This will particularly be so where there are other people using the area at the same time you are working. In those circumstances there is no additional cost for lighting, heating or cooling.

Lean on the experts at Tax Time

Your Kelly+Partners Client Director can help you with claiming these costs, as these rules are complex, but you must make sure you have suitable records in order to make the claim. All fees paid to an advisor to help with the preparation of your tax return are deductible - an added bonus! 

The ATO also provides tools on their website that can help you calculate your expenses. These calculators include guidance on claiming depreciation.

If you are Private Business owner who is looking for advice and assistance with your business and tax affairs. Contact us today below! 

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