Working from Home Expenses
The ATO has announced a temporary simplified method for individual taxpayers to calculate deductible home office expenses incurred as a result of working from home during the pandemic.
The ATO will allow individuals to claim a deduction for all running expensesincurred during the period 1 March 2020 to 30 June 2020, based on a rate of $0.80 for each hour that an individual carries out genuine work duties from home. This is a simpler alternative to the existing arrangements, which generally require an analysis of specific running expenses incurred and more onerous record-keeping.
This simplified method is designed to cover all deductible running expenses associated with working from home and incurred from 1 March 2020 to 30 June 2020, including the following:
- Electricity expenses associated with heating, cooling and lighting the area at home which is being used for work.
- Cleaning costs for a dedicated work area.
- Phone and internet expenses.
- Computer consumables (e.g. printer paper and ink) and stationery.
- Depreciation of home office furniture and furnishings (e.g. an office desk and a chair).
- Depreciation of home office equipment (e.g. a computer and a printer).
Under the $0.80/hour method, separate claims cannot be made for any of the above running expenses, including for depreciation of work-related furniture and equipment.
As a result, this method could result in a claim for running expenses being lower than a claim under existing rules.
For example, the existing $0.52/hour home office method covers heating, cooling, lighting, cleaning and the depreciation of office furniture, but other genuine work-related home office expenses may be claimed separately (subject to the usual substantiation rules). These separately claimable expenses would generally be the work-related portions of phone and internet expenses, computer consumables, stationery and the depreciation of a computer, laptop or a similar device.
However, the existing $0.52/hour method does require some additional record-keeping and calculations, whereas under the new $0.80/hour method:
- there is no requirement to have a separate or dedicated area at home set aside for working;
- multiple people living in the same house could claim under this method (e.g. a couple living together could each individually claim running expenses they have incurred while genuinely working from home, at $0.80/hour each); and
- an individual will only be required to keep a record of the number of hours worked from home as a result of the pandemic, during the 1 March 2020 to 30 June 2020 period. This record can include timesheets, diary entries, notes or even rosters.
Working from home expenses that are incurred prior to 1 March 2020 must be claimed using existing claim arrangements which, broadly, require:
- an analysis of specific running expenses incurred as a result of working from home; and
- more onerous record-keeping (e.g., the requirement to provide receipts and similar documents for expenses being claimed, as well as the requirement to maintain a time usage diary or similar record to show how often a home work area was used during the year for work purposes).
Additional information on the various methods for claiming home office expenses is available on the ATO website.
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