Did you say home office?
What is the first thing you think of when somebody says ‘home office’?
Does your mind go to the design of the space? Do you maybe have a vivid memory of your partner trying to tame your toddler in the background? Do you love the fact that you can sleep in and basically just brush your teeth and you are at work?
I thought so – not many of you thought TAX TIME, did you?
Well, here at Wealth Market that is the first thing that comes to mind when we hear home office.
Due to the COVID-19 outbreak, many of us will be able to claim some of our expenses as a tax deduction for the first time this year. As your go-to-partners for all things financial we wanted to give you some tips before you visit your tax accountant this year.
If you are working from home during the COVID-19 crisis, the Australian Taxation Office (ATO) has released some information to help you understand what you can claim at tax time due to this change in circumstances. Let’s dive into the details:
We can claim a deduction when:
- We have spent money on home office expenses that relate directly to earning an income.
- We have a record of the expense to prove we have incurred the expense.
- The expense has not been reimbursed to us by our employer or another party or entity.
What can we claim a deduction for?
- 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
But hang on…it gets even better!
During these challenging times the ATO will accept a simplified method for us to track and prove our expenses to them. This is only valid for the period of time from the 1 March 2020 to the 30 June 2020, but may be extended if needed. If you would like to use this ‘Shortcut Method’, as the ATO calls it, you can simply claim a deduction of 80 cents for each hour you work from home as long as you are working from home for a significant period of time (not only checking a few emails here or there) and are actually incurring additional expenses as a result of working from home. You don’t need to dedicate a separate area to working, you can just work from your dining room table, or if you're lucky your balcony!
The expense needs to be an allowable deductible expense such as the items mentioned above. And the same rules apply - you must not claim for an expense that has been reimbursed by someone else (e.g. your employer); you need to prove that you worked for the hours that you are claiming for; and also if you use the shortcut method you can’t claim the expense again in another section of your tax return.
Just ask your accountant to add the note ‘COVID-hourly rate’ in your income tax return. If you don’t want to use the shortcut method you can claim via the fixed rate method or the actual cost method. Your accountant will be able to guide you on the best method for your situation.
So happy claiming – enjoy working from home and remember to lock the door if you are presenting live on a major TV network. This guy wishes he did!
Please note that we are not able to provide you with personalised tax advice. This is general advice only and may not be appropriate to your personal circumstances. When writing this article we did not take into account your personal objectives, financial situation or needs. You need to get additional advice and take into consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs, if you intend to act on any of the items discussed above and your accountant will be best able to support you with this.