Nassim Khadem* says Australians working from home because of coronavirus are now eligible for a new deduction shortcut.
Claiming tax deductions for working from home due to coronavirus is being made easier.
The Australian Taxation Office (ATO) is introducing a new method which will allow people to claim 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses.
The change will apply from 1 March to 30 June, after which the ATO will review the arrangement for the next financial year as the COVID-19 situation progresses.
“If you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim,” ATO Assistant Commissioner, Karen Foat said.
Multiple people living in the same house will be able to claim the new rate.
“For example, a couple living together could each individually claim the 80 cents per hour rate,” Ms Foat said.
And the requirement to have a dedicated work-from-home area has also been removed.
“This recognises that many taxpayers are working from home for the first time and makes claiming a deduction much easier,” Ms Foat added.
The new arrangement does not prohibit people from making a working-from-home claim under existing arrangements, where you calculate all or part of your running expenses.
“Claims for working-from-home expenses prior to 1 March 2020 cannot be calculated using the shortcut method and must use the pre-existing working from home approach and requirements,” Ms Foat said.
If the Federal Government announces a prolonged lockdown extending into the next financial year, the ATO is likely to extend the new claiming method.
Each year, the ATO pays out tens of billions of dollars in tax deductions, the highest being for work-related expense claims and rental claims.
In the 2017–18 financial year, there were almost 9 million taxpayers claiming $21.7 billion in work-related expenses.
Ms Foat said that number could rise, given many people are working at home for the first time.
And she said the ATO “definitely” believed the new method would cut down on the need for reviews and audits, because it was simpler and reduced the chances of people making mistakes.
The ATO is also reminding people that the three golden rules for deductions still apply.
“Taxpayers must have spent the money themselves and not have been reimbursed, the claim must be directly related to earning income, and there must be a record to substantiate the claim,” Ms Foat said.
Ms Foat said many Australians were now asking the ATO if they could claim items like children’s education expenses, as well as tea, coffee and toilet paper, which used to be supplied by employers in the office.
The short answer: No.
“Just because you have to provide those things for yourself doesn’t make them deductible,” Ms Foat said.
“You cannot claim your rent or mortgage [unless it is an investment property].”
And regardless of what method people use, they need to keep good records.
“For the shortcut method, they really need a record of the hours they are working from home,” Ms Foat said.
“For many people, it is a record of their time sheets.”
“For others it may be an Outlook calendar [or] keep a diary.”
Ms Foat said people still had the option to use the old claiming method for specific items, but that may prove tricker to calculate.
This is known as the 52 ¢/h method for claiming items such as heating, cooling, lighting, cleaning and the decline in value of office furniture.
Taxpayers can also use this old method to calculate the work-related portion of phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.
But under the 52 ¢ method, taxpayers will need to apportion their use between what is personal and what is work-related, and must do so on “a reasonable basis”.
Confused?
The ATO gives this example of how the arrangement might work:
Bianca is an employee who works as a copy writer and editor.
Bianca starts working from home on 16 March, as a result of COVID-19, and replaces her face-to-face meetings with online video conferencing.
Bianca has just bought a new laptop, desk, chair and stationery.
She also wants to claim some additional gas, electricity, phone and internet costs due to working from home.
Under the shortcut method, Bianca can now claim all her expenses under a rate of 80 ¢/h.
She will need timesheets or some other form of legitimate evidence to show how many hours she has worked.
Bianca can also decide to claim using existing working from home calculations.
Under that method, Bianca can claim the desk, chair, gas and electricity under the 52 ¢/h rate, but would need to work out the decline in value of the laptop, and calculate the work-related portion of the laptop, stationery, phone and internet.
* Nassim Khadem reports on business news across online, radio and TV for the ABC. She tweets at @NassimKhadem.
This article first appeared at www.abc.net.au.
