The Australian Taxation Office (ATO) have announced a simplified home office deduction for people working at home due to the COVID-19 pandemic. Under the new system, eligible workers will be able to claim a fixed rate for additional expenses incurred as a result of working from home. These new measures will also lessen the burden of proof on affected taxpayers.
Ordinarily, there are two methods to claim home office expenses. The first is the set rate method, which allows a taxpayer to claim 52 cents for each hour spent working at home. This set rate covers the cost of heating, cooling, lighting, cleaning and any decline in value of office furniture. The taxpayer could then claim a percentage, based on how much the items are used for work purposes, of the costs of phone and internet expenses, computer consumables such as printer ink, stationery, and the decline in value of any computers. The other method, known as the actual cost method, involves claiming a portion of the actual costs incurred for all items.
Both of the normal methods require high levels of record keeping to prove to the ATO that the costs were incurred. For some expenses they also require a part of your home to be set aside for work only, such as a study. Finally, only one person per household can claim the 52 cents per hour method.
Under the new temporary system, tax payers working from home will be able to claim a flat rate of 80 cents per hour of work, which can be claimed by multiple people in the house, assuming they are all working from home. The requirements for record keeping are also relaxed, as the taxpayer will only need to keep a record of the time worked to claim under this method, rather than needing to keep records of actual expenses incurred.
However, there are some things to keep in mind. First, this method can only be used from 1 March 2020 to 30 June 2020. For any work done from home outside of this period you will need to use one of the other methods. Second, the 80 cents per hour rate covers more items than the standard 52 cents per hour method, so you are unable to make separate claims for your phone and internet expenses, computer consumables, stationery and decline in value of computers. This means that, depending on your circumstances, you may be better off using the normal methods, as your deductions could be higher than the 80 cents per hour method allows.
This is a difficult time for everyone, so if you need help with your taxes or advice on the stimulus packages, call our friendly staff at Crest Accounting on (02) 4933 3466. Our accountants are receiving constant updates on the rapidly changing ATO and Government tax and stimulus responses, and we would be happy to help.