On 7 April 2020, the Australian Taxation Office (ATO) announced a temporary short cut method for claiming home office expenses.
This temporary measure makes it easier for individual tax payers to claim deductions for additional running expenses in this time of working from home due to Coronavirus (COVID-19) restrictions.
The ATO will allow an individual to claim a deduction for all running expenses during the period 1 March 2020 to 30 June 2020 at a rate of 80 cents for each hour that an individual conducts genuine work duties from home.
Who is eligible to claim this shortcut method?
You can claim a deduction of 80 cents for each hour you work from home due to COVID-19 as long as you are:
- working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls,
- incurring additional deductible running expenses as a result of working from home.
How does it work?
The 80 cents per hour covers all deductible running expenses associated with working from home in the period 1 March 2020 to 30 June 2020.
The expenses included in the 80 cents per hour are the following:
- electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
- the decline in value and repair of capital items, such as home office furniture and furnishings
- cleaning expenses
- your phone costs, including the decline in value of the handset
- your internet costs
- computer consumables, such as printer ink
- the decline in value of a computer, laptop or similar device.
This means that you can not claim a separate tax deduction for any of the above expenses while claiming the 80 cents per hour. Given this, in some cases, claiming the 80 cents per hour may result in a lower deduction than the existing home office arrangements.
What’s the difference between the shortcut method (80 cents per hour) and the existing method (52 cents per hour)?
The key differences are displayed in the table below. You will notice that the main differences are in the requirements around record keeping. The Shortcut method requires you to keep less records however you can not claim any other separate expenses:
|Shortcut Method (80 cents p/h)||Existing Method (52 cents p/h)|
|Can separately claim|
– phone and internet expenses
– computer consumables and stationery
– decline in value on computers or other equipment.
|RECORDS TO KEEP|
|keep a record of the hours you worked at home, for example timesheets or diary notes||Yes||No|
|diary entries for a representative four-week period to show your usual pattern of working at home that show|
– you worked from home and made work
– related phone calls how you work out how much you used your equipment, home office and phone for work purposes over a representative four-week period
|receipts or other written evidence, including for depreciating assets you have purchased||No||Yes|
|diary entries to record your small expenses ($10 or less) totalling no more than $200, or expenses for which you can’t get any kind of evidence||No||Yes|
|itemised phone and internet accounts (paper or electronic) from where you can identify work-related calls and internet use, or other written records, such as diary entries if you don’t get an itemised bill.||No||Yes|
Can I choose which method to use?
Yes, home running expenses incurred prior to 1 March 2020 must use the existing method (52 cents per hour) however after 1 March 2020, the individual can choose to use the shortcut method (80 cents per hour) or the existing method.
If you have would like to discuss any of the above further please do not hesitate to contact us 1300 978 320.