Claiming deductions for working at home due to COVID-19

ATO introduces the shortcut method of calculating additional running expenses from working at home

As the COVID-19 pandemic hit the world stage and changed the way we live and work, many Australians have been and are still working from home. The Government is aware that employees are faced with increased expenses when working from home. In response, the Australian Taxation Office (ATO) has detailed new guidance on what expenses can be claimed. As we see restrictions soon lifting, we remind our clients of the record-keeping requirements while the details are fresh on hand.

ATO’s Shortcut Method – only available 1 March to 30 June 2020 unless otherwise advised.

Introduced is a temporary short cut method that will help simplify working out the appropriate tax deduction. With this method, you can claim eighty cents ($0.80) for every hour you work from home due to COVID-19. The hourly rate covers all additional running expenses, namely:

• electricity (lighting, cooling/heating and electronic items used for work, for example a computer) and gas (heating) expenses
• the decline in value and repair of capital items such as home office furniture and furnishings
• cleaning expenses
• phone expenses including the decline in value of a phone handset
• internet expenses
• computer consumables
• stationery, and
• the decline in value of a computer, laptop or similar device.

If you decide to use this method to claim a deduction, you cannot claim a further deduction for any of the expenses listed above.

To substantiate this claim, you will be required to record the hours you have worked from home. This could be in the form of timesheets, rosters, a diary or similar document that sets out the hours worked.

If you use the shortcut method to claim a deduction and you lodge your 2019–20 tax return through myGov or a tax agent, you must include the note ‘COVID-hourly rate’ in your tax return.

Other Methods

Other traditional methods that can also be used to calculate home office expenses include: the Fixed-rate method ($0.52 per hour) and the Actual cost method. You must meet the record-keeping requirements and working criteria to use each method.

For further reading, go to: https://www.ato.gov.au/general/covid-19/support-for-individuals-and-employees/employees-working-from-home/