Working from Home Tax deductions during COVID-19

During the COVID-19 lockdown, working from home has become the new normal. In between assembling a makeshift home office, mastering Zoom conference calls, and socially distanced visits to Officeworks, the next adjustment will come in the form of higher power, internet and phone bills. Come tax time, it good to get on the front foot when it comes to claiming these extra expenses as tax deductions.

Among the many stimulus packages, the federal government has also released a special COVID-19 working from home tax deduction shortcut. This shortcut currently runs from 1 March to 30 June and is designed to take the hassle out of claiming work from home expenses. For some, this shortcut will make things easy, for others it could leave them short changed. Deciding which method to choose can be tricky so let’s compare the difference.

How do working from home tax deductions normally work?

In broad terms, claiming working from home expenses gets complicated. There are three dimensions to consider first before beginning to know what you can and cannot claim for.

These three dimensions include:

  1. The type of expense – these include running expenses, occupancy expenses, phone & internet expenses along with depreciation costs of your own computer and office equipment.
  2. Your work from home arrangements – you can only claim for occupancy costs if your home is your principal place of work and you can only really claim running costs if you have a dedicated work area (e.g. a study).
  3. The claiming method – each type of expense listed above has its own method to calculate the amount you can claim.

It’s fair to say this takes some time to get your head around all of this to make a claim. Which is why during the COVID-19 lockdown, a new method has been created, albeit temporarily, to make locked down life a bit easier.

What is the COVID-19 working from home tax deduction ‘shortcut‘?

The new rule says that you can simply claim 80 cents for each hour that you worked from home from 1 March to 30 June. Easy! The only record you need to keep is a diary or timesheet for the hours you have worked from home during this period. You must be actually working (not just ‘on call’) and have incurred additional expenses that your employer has not reimbursed you for.

If you use this shortcut method, you cannot also claim for occupancy expenses (a portion of your mortgage interest, rates or rent).

What method should I use?

The new shortcut method is designed for people who are working from home due to the COVID-19 lockdown, but anyone can use it. So, if you are only working from home temporarily this new method will certainly be the easiest to calculate and claim for.

If you have normally worked from home a lot or it is your principle place of work, switching to the shortcut method may not be worth it, particularly if you wish to claim for occupancy expenses. You can of course calculate both methods first and see what makes most sense.

Get the right tax advice

With any new tax law there are many different scenarios that make applying the new rules unclear. If working from home is a new awakening for you and you want to make it a more permanent arrangement, then talk to us about how to best calculate your working from home tax deductions.

Saige Accountants in Erina provide business and individual tax advice across the Central Coast. We keep up to date on the latest tax laws and are in the best position to help you minimise tax. Talk to us about your working from home tax deductions.

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