Many are still working from home. For some, it is permanently from home. For others, it’s maybe a few days a week.
But the ATO’s special rates as a tax deduction brought about by the pandemic has ended.
This was the 80-cent shortcut rate method. Basically, you get 80 cents for every hour you work from home, but then can claim nothing else, including phone, internet, the decline in value of equipment and furniture, electricity and gas. It did not often give the best result, but was simple. It meant you just needed to keep a track of hours worked and nothing else.
But this year everything changes. You need to use the fixed rate method or the actual cost method to claim work-from-home expenses.
Both the fixed rate method and actual cost method are more complicated and require more detailed records.
Fixed rate method
You can claim 52 cents for each hour you worked from home. That rate includes the decline in value of home office furniture such as a desk, electricity and gas, and cleaning. But you can also make separate claims for the work-related proportion of items such as your home internet, mobile phone costs and other expenses that directly relate to your work such as stationery and printer ink.
These additional deductions require detailed receipts or other written evidence.
To claim phone expenses, you must have phone accounts, identifying work-related calls and private calls to work out the percentage over a typical four-week period.
And to claim internet expenses and asset depreciation, you must keep a diary showing their work-related internet use and the percentage of the year they use their depreciating assets exclusively for work.
Actual cost method
The actual cost method allows you to claim a deduction for the actual expenses you incur by working from home.
Deductions for asset depreciation, cleaning expenses, electricity and gas, phone and internet and computer consumables are calculated individually, and require detailed evidence, including receipts and diaries used to calculate the work-related percentage of each. From this, you can then work out the work-related proportion of your household expenses and apply this percentage to the actual amount you spend on electricity, gas, water, phone and internet. You’ll also need to keep all the original bills to prove your claim.
But beware. You need to have a dedicated space for your home office – if you are working from your kitchen worktop or dinning table it will be hard to justify expenses.
For example, to claim cleaning expenses for an area set up as a home office, the taxpayer must add together their receipts and multiply the total by the floor area of the dedicated work area, divided by the whole floor area of the house.
Here’s another example – Jess works from her lounge room while two toddler children watch television. Jess isn’t incurring any additional costs for lighting, heating or cooling as a result of working in that room, so she can’t claim a deduction for them.
If you would like to discuss which is the best method for you and which will give you the best result, give us a call on 07 3161 9548.
