What you can and can’t claim when working from home during Covid (19)
With the increased number of employees working from home due to coronavirus, we wanted to ensure you understand how and what you can claim within your tax return. Media announcements regarding this topic have been ambiguous and confusing.
If you are an employee required to work from home, you may be able to claim a deduction for the expenses that are incurred while performing your work duties at home.
Generally, to claim a working from home deduction then all the following must apply:
- You must have spent the money;
- The expense must relate directly to earning your income;
- You must have a record to prove the expense;
- You have a dedicated work area (not applicable for “Shortcut method” see below).
There are three methods you can use to claim your deduction:
- Shortcut method;
- Fixed rate method;
- Actual costs method.
The ATO have made claiming working from home deductions during Covid(19) easy. They have introduced a new method which will allow people working from home during Covid(19) to claim 80 cents per hour for all their running expenses, provided you are not reimbursed by your employer.
This method covers all running costs (including depreciation, phone and internet costs) and there is no requirement to operate in a dedicated work area to claim the tax deduction during the eligible period.
To claim working from home you will need to record your actual hours worked from home, records can be kept on your computer or written in a diary. Records should include the date you worked from home, the time you spent working and the total hours worked on that day.
The shortcut method is only available due to the Covid(19) pandemic for work you do at home from 1 March until 30 June 2020.
Fixed Rate Method
Working from home claims prior to 1 March and after 30 June will need to use the fixed rate or actual costs method.
A fixed rate of 52 cents per hour can be claimed for each hour worked from home. You will need to keep a record of actual hours worked at home or a diary showing your usual pattern of working from home over a four week period (applied across the remainder of the year).
This method covers heating, cooling, lighting, cleaning and the decline in value of furniture.
If you are using the Fixed Rate method the following may be claimed in addition:
- Phone and internet expenses;
- Computer consumables and stationary;
- Decline in value on computer or other equipment.
To claim the above expenses you must work out the percentage the item is used for work purposes and keep receipts and records to prove your claim.
Actual Costs Method
Under the actual running expenses method you are entitled to claim a proportion of the running expenses of your home office. This method is more complex requiring more detailed records.
To use this method, you will need to work out the percentage of your household running expenses that are related to performing your work in your dedicated office. This percentage is applied to your actual running costs incurred during the period of working from home. Your records of hours working from home and receipts for expenses will need to be kept to prove your claim.
Expenses can include a portion of:
- Heating, cooling and lighting bills;
- Depreciation of home office furniture and fittings, office equipment and computers;
- Costs of home office related repairs;
- Computer consumables;
- Phone and Internet expenses.
It can be tricky understanding the different requirements and methods to claim work related expenses. If you are uncertain about how or what to claim, please feel free to contact us for advice.