The impact of the coronavirus means that for many Australians home is now a secondary work space.
While there are many obvious advantages to employers requiring their workers to complete their tasks from home, one of those frequently overlooked is the opportunity it presents for those employees at the end of the financial year.
The Australian Payroll Association (APA) says that if you work from home, having a specific room set aside as a home office makes it much easier when it comes to what deductions you can claim come tax time.
This is because if you are using a room with a dual purpose (i.e a dining room), or a room shared with others, such as a lounge room, you can only claim the expenses for the hours you had exclusive use of the area.
That said, the APA says you can still claim the work-related proportions of household costs including heating, cooling and lighting bills, the costs of cleaning your home working area and depreciation of home office furniture and fittings.
Other costs that you might be able to claim back as a tax deduction this financial year include the depreciation of office equipment and computers, the costs of repairing home office equipment, furniture and furnishings, computer consumables such as printer ink and stationery; and mobile, landline and internet expenses.
Small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately and don’t need to be depreciated.
While you might assume that you can claim a percentage of rent or the interest on a mortgage if you’re working from home using a home office, sadly, this isn’t the case, the APA says.
It says there are two distinct methods employees can claim these types of expenses. The first is to keep a diary to work out how much of your household running expenses relate to doing work in your home office and the second is to use the ATO hourly template option, which has been increased significantly as a result of this global pandemic.
If you decide to go with the former, your diary needs to detail the time you spend in the home office, compared with other users of the home office. Keep your diary record for a representative four-week period. The ‘work-use proportion’ you come up with over that four-week period can then be applied to all your actual expenditure over the course of the year.
“It may well be that you are already work from home from time to time but that the amount of home-working will spike over the next few weeks or months. If that’s the case, keep a separate diary for the period of your ‘corona-induced’ home working to justify the larger claim over this period – and don’t try to apply this larger work-related proportion to the whole year,” the APA says.
The APA says that of the two methods this usually produces the larger deduction but the record-keeping requirements are more stringent.
The alternative method is where you can use a special COVID-19 fixed rate of 80 cents per hour for home office expenses for heating, cooling, lighting and the decline in value of furniture. This is instead of keeping details of actual costs.
All that is required is that you keep a record of the number of hours you use the home office and multiply that by 80 cents per hour.
You can then make a separate claim for the following:
- phone and internet expenses
- computer consumables and stationery; and
- depreciation of computers or other equipment.
In more good news for these workers, the Morrison government is also offering an automatic tax offset this year, providing up to $1,080 relief for workers, depending on their total income.
Those earning under $37,000 will receive $225 or less, while those who earned between $37,000 and $126,000 will receive up to the full $1,080.
Those earning more than $126,000 are ineligible for the offset.