By Alisa Sainoski

The COVID-19 pandemic has changed all our ways of living and if you are one of the lucky ones, you will be or have started working from home.  Most of us have never claimed ‘home office’ expenses or were relatively small claims, which were mostly at weekends, or in the evenings.  With the explosion in the numbers of people now working from home due to COVID-19, the situation has changed significantly.  We are now required to work from home and it looks like working from home is on a semi-permanent basis until the danger of the pandemic is over.

So now you are working from home in your comfiest PJs and looking after your loved ones, what do you need to know if you are going to make a tax claim for home office expenses. There are two methods you can use:

  1. The simpler short cut deduction method which was recently announced by the government and applies from 1 March 2020 to 30 June 2020, or
  2. Claiming a proportion of the running expenses of your home office.

The short cut deduction method allows you to claim a rate of $0.80 for each hour you are working from home provided you are not reimbursed by your employer.  You will need to keep a record of the hours worked in support of your work from home claim.  Have something on your computer or phone or a small book in which you record the date, the time you spent working and the total hours worked on that day will be sufficient.  If you are working a standard 38 hour week this should be pretty easy rather than having to keep a detailed diary every day.  Having this record available to support your claim will be essential when it comes to submitting your income tax return for 2020, for both your accountant and the Australian Taxation Office (‘ATO’).

The short-cut method is only available due to the COVID-19 pandemic, for work you undertake at home from 1 March until 30 June 2020.  So if this is the first time you’ve ever worked from home it may be an easy way of claiming the deduction.  The alternative, if you wish, is to use the proportion of running expenses method during this time which may require you to keep much more detailed records, as you will see.

The running expense method is the usual way of calculating your home office costs for tax purposes.  If you have been using this method in the past it may be just as easy to continue with it rather than change to the short-cut method which we hope will last for a short period.  It is up to your discretion as to how you would like to claim for office home expenses.  There are a further two methods of calculating your home office running expenses if you elect to use this method.  The first is the fixed rate method of $0.52 per hour, which is similar to the way you would calculate the deduction under the short cut method. If you have worked from home previous to the pandemic then you may split the home office expenses into two periods.  One being the 52 cents per hour from July 2019 to February 2020 and then claiming the $0.80 per hour from March 2020 until June 2020.

The second is to use the actual expenses method, but as a word of warning, it can be used only if there is a dedicated area set aside as your home office and may have Capital Gains Tax (‘CGT’) implications when you sell your main residence.

Under the actual expenses method you are entitled to claim a proportion of the running expenses for your home office.  Expenses can include a proportion of:

The apportionment is calculated by the floor area of the house and the floor area of your home office.

The most important thing is to keep records of the time you spend working from home and the costs associated with it as trying to re-create expenses come tax time is difficult and time consuming.  And as a net result, you may end up with a lower tax deduction.

Tips to help your record keeping:

Please reminder your wellbeing and safety should be your main priority when it comes to working in the pandemic.  If you are feeling stressed and overwhelmed, please take a moment to take care of yourself and the people you love.

If you ever have any questions, please feel free to contact our team at Venta Belgarum Associates.

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