Tax deductions for working at home during COVID-19 - Wolters Kluwer CCH

Tax deductions for working at home during COVID-19

By Colin Lua

It may come as no surprise that a large percentage of the Australian workforce is currently working from home due to the COVID-19 pandemic. While this form of social distancing has proven to be successful in helping minimise the spread of the coronavirus, employees working from home should be aware that there are tax deductions that could be claimed from utilising their home resources for work.

There is a distinction between running and occupancy expenses incurred while working from home. While the ATO acknowledges that an employee may incur running expenses such as, electricity, cleaning, telephone, internet and equipment costs, while working from home, the deducting of occupancy expenses is reserved for taxpayers who conducts business based in their homes. Occupancy costs consist mainly of mortgage interest, rent and council rates.

The ATO has said that only running expenses can be claimed by employees working from home due to COVID-19 and introduced a shortcut method for calculating work from home expenses due to the coronavirus. The shortcut method allows a rate of 80 cents per hour work deduction for employees working from home due to COVID-19, and provided the work is not minimal, such as checking emails or taking calls. The shortcut method is only temporary, and is only available from 1 March 2020 to 30 June 2020. In order to take advantage of the shortcut method, records should be kept of the number of hours worked during the COVID-19 period. This can be in the form of timesheets or work diaries. Do note that, once the shortcut method is utilised to calculate work from home expenses, the taxpayer is no longer allowed to further claim any such running expenses.

There are two other methods that can be used to calculate the amount of working from home expenses, namely the fixed rate method, and the actual cost method. Quite similar to the shortcut method, the fixed rate method allows a rate of 52 cents per hour for the running expenses such as heating and cooling, and depreciation of the cost of office furniture. Other expenses such as computer equipment, phone and internet expenses can be separately deducted based on the work-related portion of the expense.

The actual cost method on the other hand, allows the claiming of deduction for the work-related portion of all running expenses, which is calculated based on a reasonable basis.

Get more information on home office expenses on CCH iKnow.