Keep track of your work-from-home costs ahead of tax time!

Amid the Covid-19 pandemic, to simplify the process of claiming home office expenses, the ATO introduced the shortcut method where taxpayers can choose to claim a fixed rate of $0.80 per hour for all running expenses for the 2020-21 Financial Year. However, it has been cautioned that to utilise this method, a diligent log must be kept by both business owners & employees working from home.

In step with the rest of the world, our working patterns have changed and it is important that Australians are aware of their entitlements under ‘the new normal’. Record-keeping means that taxpayers must maintain a logbook of actual hours worked from home or a diary representative of a 4 week period. This amount of use can then be applied over the year to determine the full claim. If you haven’t filled out this log, you have the next 7 weeks to get it done.

If you are working both in the office and at home, it is important to keep a record of the different hours worked. The short-cut is the easy method, but individuals can still claim based on actual expenses incurred. If claiming expenses incurred, individuals will still need to comply with necessary complex record-keeping requirements.

Working-from-home claims can be calculated as follows:

  1. $0.80 per work hour for all additional running expenses
  2. $0.52 per work hour for heat, cooling, lighting, cleaning, declining value of office furniture + calculate work-related portion of phone, internet, computer consumable, stationery & decline in value of computer or laptop
  3. Claim the actual work-related portion of all running expenses, which taxpayers need to calculate on a reasonable basis

The ATO has also reminded taxpayers that the three golden rules for deductions still apply:

  1. Taxpayer must have spent the money themselves & not have been reimbursed
  2. The claim must be directly related to earning income
  3. There must be records to substantiate the claim

Expenses you can claim:

  • Electricity expenses associated with heating, cooling and lighting the area from which they are working and running items they are using for work.
  • Cleaning costs for a dedicated work area.
  • Phone and internet expenses.
  • Computer consumables (for example, printer paper and ink) and stationery.
  • Home office equipment, including computers, printers, phones, furniture and furnishings; you can claim either the  
    • Full cost of items up to $300
    • Decline in value (depreciation) for items over $300.