Many employees are now being required to work from home to meet social distancing requirements placed on them by COVID-19, and are now faced with meeting some of the costs associated with their job, such as heating, lighting, internet; costs that are normally paid by their employer.
Expenses incurred by employees that are related to their job can typically be claimed as a tax deduction. Deductible running expenses include:
- Utilities such as heating, cooling and lighting.
- Cleaning costs for your work area.
- Mobile or landline phone expenses for work calls.
- Internet connection
- Computer consumables and stationary
- Repair costs for home office equipment and furniture
- Depreciation of home office equipment, computers, furniture and fittings
- Small capital items such as a computer (purchased for the purpose of working from home) can be claimed if they cost under $300. If the cost exceeds $300, the decline in value can be deducted.
The ATO has introduced a new ‘shortcut method,’ where you can claim additional running expenses at a rate of 80 cents for each hour you work from home as a result of COVID-19. The shortcut will apply from 1 March 2020 to 30 June 2020. A record of hours worked such as timesheets or rosters must be kept as proof. If you only undertake minimal work tasks from home such as occasionally checking emails or taking calls, then you are not eligible for the deduction. To claim the deduction, you must specify your claim with the note “COVID-hourly rate” when lodging your upcoming 2019-20 tax return.
Individuals can also choose to deduct working from home expenses using the pre-existing methods, which may prove to be more tedious.
- The actual cost method: individuals claim the actual portion of running expenses incurred for work by keeping a diary that details the work portion of your household running expenses. This can include receipts and documents supporting your claim.
- The fixed-rate method: a fixed rate of 52 cents per hour worked can be claimed. This applies for electricity and decline in furniture expenses, but the actual work-related portion of expenses must be calculated for phone and internet costs, the depreciated of office equipment and computer consumable and stationary.
Expenses such as rent, mortgage and insurance cannot be claimed unless you have a permanent home office.