A new work from home deduction
As previously mentioned the ATO has introduced specific deductions to cater for the people who have worked from home during the lockdown period due to COVID 19.
Currently the COVID affected time period is:
- 1 March 2020 to 30 June 2020 in the 2019–20 income year, and
- 1 July 2020 to 30 September 2020 in the 2020–21 income year.
For home office expenses prior to 1 March, the normal way of calculation applies. Details see
Calculating your expenses
For the 2019–20 income year, there are three ways of calculating home office expenses depending on your circumstances.
The methods are the:
- Shortcut method (80 cents) – only available 1 March to 30 June 2020 (and until 30 September 2020 for the 2020–21 tax year)
- Fixed rate method (52 cents)
- Actual cost method.
You can choose to use the one method that gives the best outcome as long as you meet the criteria and record keeping requirements for each method.
Consider your eligibility
A confirmation that you are genuinely working from home i.e.
- You were working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls
- You incurred additional running expenses as a result of working from home.
To claim a deduction for working from home, all the following must apply:
- you must have spent the money
- the expense must be directly related to earning your income
- you must have a record to prove it.
This means you can’t claim a deduction for items provided by your employer, or if you have been reimbursed for the expense.
If you are not reimbursed by your employer, but receive an allowance from them to cover your expenses when you work from home, you:
- must include this allowance as income in your tax return
- can claim a deduction for the expenses you incur.
Shortcut method (80 cents) covers all of your work from home expenses, such as:
- phone expenses
- internet expenses
- the decline in value of equipment and furniture
- electricity and gas for heating, cooling and lighting.
If you use this method, you can’t claim any other expenses for working from home
You don’t need to have a dedicated work area to use this method.
You must keep a record of the number of hours you have worked from home e.g. this could be a timesheet, roster, a diary or documents that set out the hours you worked from home.
Fixed rate method (52 cents) covers all expenses you incur for:
- the decline in value of home office furniture and furnishings – for example, a desk
- electricity and gas for heating, cooling and lighting
- the cost of repairs to your home office equipment, furniture and furnishings.
To claim using this method, you must keep records of either:
- your actual hours spent working at home for the year
- a diary for a representative four-week period to show your usual pattern of working at home.
- you need to have a dedicated work area, such as a home office when you work from home.
This method doesn’t include the following, so you will need to separately calculate your work-related use for:
- phone expenses
- internet expenses
- computer consumables and stationery – such as ink
- decline in value of equipment – such as phones, computers and laptops.
Normal substantiation rules apply for these deductions.
Actual cost method, you can claim the additional running costs you directly incur as a result of working from home. This may include:
- electricity and gas for cooling, heating and lighting
- the decline in value of home office furniture (desk, chair) and furnishings,
- the decline in value of phones, computers, laptops or similar devices
- phone expenses
- internet expenses
- cleaning (if you use a dedicated area for working)
- computer consumables and stationery – such as ink
It is expected you have a dedicated work area.
Normal substantiation rules apply for these deductions.
Refresher of most of the expenses you can claim
If you work from home, you will be able to claim a deduction for the additional expenses you incur. These include:
- electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- cleaning costs for a dedicated work area
- phone and internet expenses
- computer consumables (for example, printer paper and ink) and stationery
- home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the
- full cost of items up to $300
- decline in value for items over $300.
Expenses you can’t claim
If you are working from home, you can’t claim:
- the cost of coffee, tea, milk and other general household items your employer may otherwise have provided for you at work
- costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
- items that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone
- time spent not working, such as time spent home schooling your children or your lunch break.
- Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.
See the above links for more info or contact VJC to discuss
General Advice warning: the information in this article is general in nature, it is not advice specific to your needs. If you want to act upon the information in this article then you should seek advice from a qualified professional. VJC WM accepts no liability to any party for acting from this information unless they have sought advice in a formal engagement with VJC WM for this purpose.
