COVID-19 has affected almost all aspects of our lives, especially our work lifestyles. And now it’s about to affect our tax returns, but at least this time for the better.
With many Australians facing the unique challenges of working from home as well as its additional unexpected costs, we decided to explore what help the Australian Taxation Office (ATO) could give us this end of financial year.
Unfortunately, we’re not tax gurus, so we’ve enlisted the help of someone who knows a thing or two about what you can and can’t claim in your tax return – H&R Block’s Director of tax communications, Mark Chapman.
WHAT CAN YOU CLAIM?
1. Heating/cooling and lighting bills
2. Phone and internet expenses
3. Costs of cleaning your home working area and repairs home office equipment
4. Depreciation of home office furniture, equipment and computers
5. Computer consumables (like printer ink) and stationery
Note: Small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately (they don’t need to be depreciated).
WHAT YOU CANNOT CLAIM
1. You cannot claim a percentage of rent or the interest on a mortgage if you’re working from home.
Note: Ideally, you should have a specific room set aside as a home office. If you are using a room with a dual purpose (e.g. dining room), or a room shared with others (e.g. lounge room) you can only claim the expenses for the hours you had exclusive use of the area.
Okay, so how do you claim your working from home expenses?
There are two methods you can use to claim your tax reductions:
1. Diary method/actual running expenses
Keep a diary to work out how much of your household running expenses relate to doing work in your home office. The 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. Of the two methods, this usually produces the larger deduction but the record-keeping requirements are more stringent.
It may well be that you are already working 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!
2. ATO rate per hour method
Alternatively, you can use a fixed rate of 52 cents per hour for home office expenses for heating, cooling, lighting and the decline in value of furniture instead of keeping details of actual costs. You just need to keep a record of the number of hours you use the home office and multiply that by 52 cents per hour.
In addition to claiming 52 cents per hour, you can also make a separate claim for:
- Phone and internet expenses
- Computer consumables and stationery
- Depreciation of computers or other equipment
Finally, a word of warning: It is quite common for people to have insufficient documentation to support a home office claim, particularly around the proportionate split between business use and personal use so be sure to keep records.
If you’d like to know more about what you can and can’t claim in your tax return head to H&R Block’s website. Or, if you’ve made donations to a charity in the past 12 months, be sure to check out our article on Charitable Donations and what you can claim.