Expenses you incur relating to working from home (WFH) are claimable due to WFH during COVID lockdowns from 1 March 2020 to 30 June 2022.
Employees and Business Owners that are having to WFH due to COVID can claim some home office expenses, currently they can choose from one of the three below methods:
Method 1: Shortcut (Simplified) Method
This allows the hours worked from home to be claimed at $0.80 per hour.
This method covers lighting, cooling/heating, running electrical items such as computers, cleaning. decline in value and repairs of home office items such as furniture and furnishings, phone usage, decline in value of a phone handset, internet usage, computer consumables, stationery and decline in value of a computer, laptop or similar device.
The taxpayer does not have to have a separate or dedicated area of their home set aside for WFH such as a private study, but having a dedicated space makes it easier to show additional running expenses have been incurred.
If a taxpayer wishes to claim using the shortcut method to calculate their additional running expenses, they will need to keep a record of the hours they have worked at home, this could be in the form of timesheets, rosters, a diary, or similar document that sets out the hours worked.
| Example | 7.5 hours per day x 5 days per week x 24 weeks* = 900 hours x $0.80 | $720 |
| Total claim | $720 |
Method 2: Fixed rate method
This allows the hours worked from home to be claimed at $0.52 per hour.
This method covers lighting, cooling/heating, running electrical items such as computers, cleaning. decline in value and repairs of home office items such as furniture and furnishings.
It does not cover other expenses such as computer consumables, stationery, phone and internet usage or the decline in value of a computer, laptop, or similar device.
To be eligible for this method you must have a separate office set aside that other members of your household that are not WFH are not in at the same time while you are WFH.
Under this method a taxpayer must record the hours worked at home along with full written evidence to substantiate those expenses that are not covered by the fixed rate per hour.
| Example | 7.5 hours per day x 5 days per week x 24 weeks* = 900 hours x $0.52 | $468.00 |
| Mobile $79 per month x 12/52 x 24 weeks* x 50% work use | $218.77 | |
| Internet $99 per month x 12/52 x 24 weeks* x 30% work use | $164.49 | |
| Total claim | $851.26 |
Method 3: Actual costs
This allows a deduction to be claimed for the actual expenses you incur while WFH.
To be eligible for this method you must have a separate office set aside that other members of your household that are not WFH are not in at the same time while you are WFH.
You are required to keep receipts or other written evidence, which show the amount you spend on expenses and depreciating assets you use while WFH.
When using this method, you add together your receipts and multiply by the floor area of the dedicated work area, divided by the whole floor area of the house, then reduce this amount by the percentage of private use by yourself and the use of home office by other household members.
Employee’s WFH generally cannot claim occupancy expenses but taxpayer’s running a business from home may:
Occupancy expenses are expenses you pay to own, rent, or use your home, they include:
Mortgage interest, rent, council and water rates, land taxes, house insurance premiums
When claiming a proportion of mortgage interest and council rates there may be capital gains tax (CGT) implications when you sell the home.
| Example | Add up all the claimable home office expenses and multiple it by the % of floor space used for your home office. |
When claiming under any of the methods:
- The money must have been spent, and not have been reimbursed by your employer.
- The expense must have been directly related to income.
- There must be receipts or substantiation.
- Minimal tasks such as occasionally checking emails or taking calls while at home will not qualify as WFH. The work must be substantive and directly related to the taxpayer’s income-producing activity.
- Deductions for biscuits, tea/coffee/sugar/milk, toilet paper, general household expenses, casual clothing, costs that related to children’s education or childcare are not claimable under home office expenses.
- The ATO will also be looking for reductions in travel and laundry expenses when taxpayers are WFH.
- If your Employer pays you an allowance to cover home office expenses, you can still claim a deduction for the expenses, however, you must include the allowance as income.
We can help
We have specialists on hand that can assist you in navigating the preparation and lodgement of your 2022 Tax Return. Contact us on 03 5221 6399 or at info@davidsons.com.au to discuss how we can help you.
This article was written by Janine Roberts.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.
References
Australian Taxation Office. (2022, June 24). WORKING FROM HOME EXPENSES. Australian Taxation Office.