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Recognising that a number of individuals are now working from the comfort of their own home for the first time due to COVID-19, the Australian Tax Office (ATO) is making it easier to claim associated expenses.
It is temporarily implementing a “shortcut method” - a flat claim rate of 80 cents per hour to cover all running expenses, which aims to make it easier for these workers to claim on expenses incurred in the carrying out of their employment duties.
Most notably, the ATO has conceded that you do not need to have a separate or dedicated area of your home set aside for working, unlike in normal circumstances, in recognition of the out-of-ordinary circumstances many Australian employees now find themselves in.
It has also been emphasised that multiple people living in the same house can claim this rate.
The shortcut method enables workers to claim a tax deduction of 80 cents for each hour they are working from home due to COVID-19, as long as they are working from home to fulfil all employment duties - not just carrying out minimal tasks such as occasionally checking emails or taking calls.
Anyone in this position must be incurring additional deductible running expenses as a result of working from home.
This shortcut method covers all deductible running expenses incurred from 1 March 2020, including:
- electricity for lighting, cooling or heating and running electronic items used for work (eg. a computer), and gas heating expenses
- the decline in value and repair of capital items, such as home office furniture and furnishings
- cleaning expenses
- phone costs, including the decline in value of the handset
- internet costs
- computer consumables, such as printer ink
- stationery
- the decline in value of a computer, laptop or similar devices.
The ATO has outlined that a worker does not have to incur all of these expenses, but you must have incurred additional expenses in some of those categories as a result of working from home.
If an individual does choose to use the shortcut method to claim a deduction for additional running expenses, further deductions for any of the expenses listed above can’t be claimed.
“If you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim,” explained the ATO’s assistant commissioner Karen Foat.
“This recognises that many taxpayers are working from home for the first time and makes claiming a deduction much easier.”
This record could be in the form of timesheets, diary note or roster.
To use the shortcut method to claim a deduction in the lodging of a 2019-20 tax return through myGov or a tax agent, you will need to include the note ‘COVID-hourly rate’ in your tax return.
While the ATO has indicated that the shortcut method is currently only able to be applied from 1 March 2020 to the end of the financial year (30 June 2020), the tax office has indicated it will review the special arrangement for the next financial year as the COVID-19 situation progresses.
Importantly, the tax office is still reminding workers that “the three golden rules for deductions” still apply:
- Taxpayers must have spent the money themselves and not have been reimbursed,
- The claim must be directly related to earning income, and
- There must be a record to substantiate the claim.
ABOUT THE AUTHOR
Grace Ormsby
Grace is a journalist across Momentum property and investment brands. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communication (Journalism) from the University of Newcastle. She’s passionate about delivering easy to digest information and content relevant to her key audiences and stakeholders.
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