Lately, we have been asked many questions relating to COVID-19 and how it will impact claimable deductions in the 2019-2020 Tax Year.
The reality is that there are going to be some significant changes.
Especially given many of you have incurred additional working from home expenses, that you wouldn’t typically experience in your normal working conditions. If this is you, definitely stay tuned until the end of this article for a detailed outline of what you need to do.
In this article, we’re going to be giving you an insight into:
- Conditions for claiming working from home expenses
- What expenses you can and cannot claim
- Calculating your expenses
- Records you must keep
Now is the perfect time to start gathering your receipts and documentation in readiness for the end of financial year.
Claiming “Working From Home” Expenses
If you have been working from home due to the restrictions, you may have some additional expenses that you can claim in your next tax return.
Perhaps you’ve rushed out to buy:
- a new work desk
- a Bluetooth keyboard
- a new laptop or computer
- new stationery
- a work phone
- or even a webcam to conduct online meetings
You may have even noticed a spike in your household bills including:
- heating & cooling
- phone costs
- internet costs
- Cleaning costs
Or, you may have bought some new equipment as part of the new “asset write-off” regulations by the government.
If you’re feeling at all confused about what you need to do, and what you can and cannot claim this year, don’t worry, we’re here to help!
One big question that may be on your mind is:
“Can I get any money back for these working from home expenses?”
Right now, the only answer we can give you is:
For most of us, the best way to receive some money back on these expenses will be to make a claim at tax time.
Here are some examples of things you may be eligible to claim in your tax return this year:
- New office equipment (new office chair, keyboard, laptop, webcam, desk, etc)
- Home office related expenses (stationery, printer ink, paper)
- A portion of your phone / internet expenses
- A portion of your home office running costs (eg. electricity, heating)
If you would like to claim a deduction in your tax return, all of the following must apply:
- you must have spent the money
- the expense must be directly related to earning your income
- you must have a record to prove it.
Expenses You Can’t Claim
According to the ATO website, if you are working from home, you can’t claim:
- the cost of coffee, tea, milk and other general household items your employer may otherwise have provided for you at work
- costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
- items that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone.
- time spent not working, such as time spent home schooling your children or your lunch break.
Additionally, if you were considering claiming some of your usual expenses such as car, travel or clothing (regardless of whether you have incurred them or not) be careful!
If in doubt it’s always best to speak with your accountant. Give us a call on (03) 9762 7344 so we can do our best to help you.
Keeping the Right Records
One of the most important things you need to be doing right now is to be gathering and holding onto receipts and records.
If you have experienced a change to your usual work patterns due to COVID-19 and are wanting to claim some of your household running costs, you will need to hold onto additional records and keep a 4-week diary.
Keeping a diary will help to record the number of hours you have worked from home and relevant expenses.
You could also record this with a:
- roster or
- similar document that sets out the hours you worked.
This will ensure that you’re covered for any changed work patterns, especially if you have previously used a:
- logbook method to calculate car expenses
- four-week representative period to calculate working from home deductions.
If you’d like more clarity on what records you should be keeping, you can download this free Records PDF here.
The ATO created this document to provide a summary of the key records you need to keep to claim work-related expenses and deductions.
Calculating Your Expenses
There are three ways of calculating home office expenses depending on your circumstances.
The main methods are the:
- Shortcut method (80 cents per hour worked) – only available 1 March to 30 June 2020. This is a newly introduced method specifically for “COVID-19”.
- Fixed rate method (52 cents)
- Actual cost method
You don’t have to use the shortcut method and there are some instances where it may not be beneficial to do so.
As your accountants, we can help to determine which method is going to be most suited to you to give you the best outcome and bang for you buck.
Give us a call on (03) 9762 7344 so speak with one our our accountants.
Here are some other conditions which you need to consider if wanting to claim working from home expenses at tax time:
- Working at the kitchen bench or table does not count as a home office
- You must have a separate room in your house dedicated to being a home office
If you don’t have a proper office set up, it’s worth talking to your accountant about what you can do.
We have a couple of weeks left until Jun 30, so now is the time to get organised and accumulate relevant documentation.
Remember to store your receipts in a safe place and keep records. Although it may seem like a pain right now, doing this will help you significantly at tax time.
It will also allow your accountant to do the best they can to keep more money in your pocket by reducing the tax you need to pay at tax time.
We wish you all the best for the rest of the week.
Keep safe & healthy!