The Australian Taxation Office (ATO) is reminding the community that the temporary shortcut method is available to those claiming working from home deductions this year.
The temporary shortcut method was created at the height of the pandemic last year to respond to the sudden influx of makeshift home workspaces.
Assistant Commissioner Tim Loh said that “even with people shifting back to the office, we know many Australians have opted to continue working from home at least one day a week.”
The working from home shortcut method allows claims at the all-inclusive rate of 80 cents per hour, rather than needing to do complex calculations for specific items.
“The shortcut method is straight forward; just multiply the hours worked at home by 80 cents,” Mr Loh said.
“The only proof you need is a record of the number of hours you’ve worked from home, such as a timesheet.”
The temporary shortcut method can be claimed by multiple people living under the same roof and, unlike existing methods, does not require a dedicated work area.
The shortcut is all-inclusive. You can’t claim the shortcut and then claim for individual expenses such as telephone and internet costs and the decline in value of new office furniture or a laptop.
Taxpayers can still claim under the existing arrangements if they choose.
“If you decide to go with an existing method, I would encourage you to do your research and keep good records. Keeping track of each individual expense and calculating the work-related use of each one can be fiddly so be organised. So, make sure you’ve read the guidance on our website or chat to your registered tax agent”, Mr Loh said.
Top 4 no-go expenses
If you chose to claim your working from home expenses through the fixed rate or actual cost methods, remember you still can’t claim:
- Personal expenses like coffee, tea and toilet paper. While they might normally be supplied by your employer, they still aren’t directly related to earning your income.
- Expenses related to your child’s education, such as online learning courses or laptops
- large expenses up-front. Any asset that costs over $300 (either in total or per item), such as a computer, can’t be claimed immediately. Instead, these claims should be spread out over a number of years
- Employees generally can’t claim occupancy expenses such as rent, mortgage interest, property insurance, land taxes and rates. Working from home does not mean your home is a place of business for tax purposes. If you claim occupancy expenses, you may have to pay capital gains tax when you sell your home, even if it is your main residence.
Three different methods for 2020–21
You can choose one of three ways to calculate your additional running expenses for this tax time:
- claim a rate of 80 cents per work hour at home for all your working from home expenses;
- claim a rate of 52 cents per work hour at home for the heating, cooling, lighting and cleaning of your dedicated work area and the decline in value of office furniture and furnishings. Then calculate the work-related portion of your telephone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.
- claim the actual work-related portion of all your running expenses, which needs to be calculated on a reasonable basis.
Remember, to claim any work-related expense, you must have spent the money yourself and not been reimbursed, the expense must be directly related to earning income (not a private expense), and you must have kept any necessary records (a receipt is best).
We will discuss the above with you when preparing your 2021 tax return.
