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Working from Home Tax Deductions

Written by Michelle Petkovska . July 06, 2021
5 min read

Lockdown! In Sydney and surrounds the COVID-19 effect is being experienced again and for those businesses who are fortunate to have the ability to conduct work remotely - many employees are again needing to work from home.

Since the pandemic first hit remote working has certainly become more prevalent and accepted in business than before, and many businesses have been set up to just operate from home. It is therefore imperative to find out the all-important details around working from home expenses and what can be claimed.

Below we identify what deductions can be claimed for those who work from home as well as those than cannot be claimed.

Contents

Criteria to claim deductions

Deductions can be claimed by employees who work from home, however what can be claimed does depend on different criteria:

  • Home as primacy place of business: If your home is your main place of work and you have an area set aside exclusively for work activities, you may be able to claim a deduction for occupancy expenses, travel expenses for business purposes and running expenses.
  • Occasional working from home: If your principal place of work is a business office but you are required to work from home occasionally to fulfil your employment duties, you can claim a deduction for work-related expenses.

What expenses can I claim?

Claimable Expenses

  • Electricity expenses associated with heating, cooling and lighting for the area from which you are working and running items you are using for work purposes
  • Cleaning costs for a dedicated work area
  • Phone and internet expenses
  • Computer consumables (for example, printer paper and ink) and stationery
  • Home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the
    - full cost of items up to $300
    - decline in value (depreciation) for items over $300
  • Occupancy expenses such as rent, mortgage, interest rates, land taxes and house insurance ONLY IF YOU HOME IS YOUR PRIMARY PLACE OF WORK.

Unclaimable Expenses

  • Coffee, tea, milk and other household items that may be provided at work
  • Expenses relating to your children and their education e.g. setting them up for online learning, teaching them at home, buying them equipment such as iPad and desks
  • If your employer reimburses you for the expense incurred or pays for it on your behalf
  • Decline in value for items provided by your employer

Methods used to calculate the deduction

1. Shortcut method

  • This was introduced as a result of COVID-19 and is only a temporary method for expenses incurred from 1 March 2020 to 30 June 2021.
  • You can claim 80 cents per hour for each hour you work from home
  • This rate covers expenses such as phone and internet costs, decline in value of equipment and furniture, electricity and gas for heating, cooling and lighting.
  • If you use this method, you cannot claim any other expenses for working from home, and you do not need to have a specific dedicated work area.
  • You do not have to incur the above mentioned expenses, however, you are required to keep a record of the number of hours worked from home.

2. Fixed rate method

  • Calculated at a fixed rate of 52 cents for each hour you work from home.
  • Covers you for the decline in value of home office furniture and finishing’s, electricity and gas for heating, cooling and lighting and the cost of repairs to your home office equipment, furniture and furnishings but does not include phone expenses, internet expenses, computer consumables and stationary and the decline in value of equipment.
  • Need to have a dedicated work area such as a home office to use this method.
    - Records must be kept of the actual hours spent working from home via a timesheet OR diary. Can also maintain a diary for a representative four-week period to show your usual pattern of working from home
    - To claim the work-related portion of the expenses not claimed under the 52 cent rate, separate physical evidence must be maintained and kept such as bills, receipts etc.

3. Actual Cost method

  • Deductions are worked out from the actual costs you incur as a result of working from home and can include the following:
    - Electricity and gas for cooling, heating and lighting
    - The decline in value for home office furniture
    - The decline in value of phones, computers, laptops or similar devices
    - Phone expenses
    - Internet expenses
    - Cleaning (if you use a dedicated are for working)
    - Computer consumables and stationary
  • To work out the work related portion of your actual expenses you will need to keep either of the below:
    - Record of the number of actual hours worked
    - A diary for a representative four week period to show your usual pattern of working from home
    - Receipts showing the amount spent on assets & the split between their private vs business portion.

With COVID-19 still affecting regions and businesses in NSW these working from home deductions are still going to be necessary for the 2022 Financial Year so make sure you are keeping a record of working hours and expense receipts.

Additional in-depth details about deductions for working from home expenses and home-based business expenses can be found on the ATO website.

If you need assistance about the above deductions for your business and employees, our team at BLG Business Advisers are here to help you so please talk with us.

We wish you and your business every success!


*This information is relevant at the time of publishing and is subject to change*
Written by Michelle Petkovska . July 06, 2021
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