The ATO has announced a temporary simplified short cut method to make it easier for individual taxpayers to claim deductions for additional running expenses incurred (e.g., additional heating, cooling and lighting costs) as a result of working from home due to the Coronavirus pandemic.
The ATO will allow individuals to claim a deduction for all running expenses incurred during the period 1 March 2020 to 30 June 2020, based on a rate of 80 cents for each hour an individual carries out genuine work duties from home. This is an alternative method to claiming home running expenses under existing arrangements, which generally require an analysis of specific running expenses incurred and more onerous record-keeping.
Under this arrangement:
- there is no requirement to have a separate or dedicated area at home set aside for working (e.g., a private study);
- 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, based on the 80 cents per hour method); and
- an individual will only be required to keep a record of the number of hours worked from home as a result of the Coronavirus, during the above period. This record can include time sheets, diary entries/notes or even rosters.
The 80 cents per hour 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).
However, if you use this method, separate claims cannot be made for any of the above running expenses (including depreciation of work-related furniture and equipment). This may result in your claim for running expenses being lower than a claim under existing arrangements. We encourage everyone to keep a “COVID-19 Register” to document their work from home hours during the pandemic – this will enable us to review which method maximises their claim at tax return time.
It’s important to also note that working from home running expenses that are incurred before 1 March 2020 (and/or incurred from this date where an individual does not use the 80 cents per hour method) 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).
Need help working out how to put together your own COVID-19 Register? Get in touch and we can walk you through it.
[Originally posted on the OakWealth Blog.]