Claiming home office expenses
Marcus Davis, Taxation Specialist at Findex
To assist people who have been working at home for the last few months due to COVID-19 restrictions, the ATO has introduced a new ‘shortcut’ method to claim any additional costs as tax deductions this year, alongside the actual or fixed rate methods.
The ‘shortcut’ method means taxpayers can claim a flat rate of 80 cents per hour for all running expenses. This will apply from 1st March, 2020 to 30th June, 2020 and allows each individual living in the same house to claim this new rate. If you use the shortcut method, it doesn’t matter if you have a dedicated work space or if you work at your dining room table. You will however, need to keep an accurate record of the number of hours you work from home.
The second way to claim is under the actual expenses method. For this method, you’ll need to calculate the actual costs associated with your dedicated area of work by apportioning costs on a reasonable basis. This may involve keeping a diary for a four week period to record the typical hours worked and calculate the percentage of your total expenses relating to work. You’ll need to examine your occupancy costs and running expenses and apportion them between work and private expenses. You’ll also need to keep all receipts for the expenses claimed.
Lastly, under the fixed method, you can predominantly claim running expenses for heating, cooling, lighting, cleaning and the decline in value of office furniture at a fixed rate of 52 cents per hour worked. Additionally, you can claim the actual calculated work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer used. To use this method, you must have a dedicated work area.
In summary, if you want to keep things simple and don’t want to do lots of calculations, the ATO’s new ‘shortcut’ method of 80 cents per hour method is simpler and involves less calculations. However, you should speak with an adviser to determine the best method and outcome for your circumstances.
For assistance with your tax return, visit the Findex Same Day Tax Refunds portal and receive up to $1,000 back on the same day for eligible clients.
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