A large swathe of Australian businesses and individual workers have had to adapt to working from their homes thanks to the COVID-19 pandemic.
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What does it mean for you come tax time? What can you claim and what do you need to prove it?
In April the Australian Tax Office (ATO) announced a simpler way for people working from home to claim tax, a new 'working from home shortcut'. The ATO will allow individuals to claim back at a rate of 80 cents per hour for all running expenses while working from home, instead of calculating costs for specific running expenses like previously.
Think, electricity costs for heating and lighting as well as phone and internet, stationery and furniture.
Take note, this new arrangement only applies to any expenses incurred after March 1 this year and you aren't required to claim under the new structure, the previous structure is still available to people that prefer to calculate specific expenses.
The Mudgee Guardian spoke with Denis Yeo from Mudgee Tax and Accounting about what you can do to be savvy when working from home.
"I think the first thing that people should do is keeping some sort of diary of hours they work at home, that would be a pretty smart thing to do" Denis said.
"If they go and buy things to work at home that they keep the receipts that's pretty easy to do, you can often get the store to just email it to you or you can get apps that let you take a photo.
"Because if you go out and buy a laptop or a desk or an office chair that you wouldn't normally buy and don't keep the receipt, then you can't claim it."
From the ATO:
Expenses you can claim
If you work from home, you will be able to claim a deduction for the additional running expenses you incur. These include:
- electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- 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 or the decline in value for items over $300.
Expenses you can't claim
If you are working from home only due to COVID-19, you can't claim:
- occupancy expenses such as mortgage interest, rent and rates
- the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work.
The ATO states that to claim a deduction you must have spent the money, it must be related to you earning your income and you must have a record to prove it.
That means anything provided to you by your employer cannot be claimed, so be careful and if unsure speak to your tax agent or contact the ATO.
Denis said it pays to know where you can generalise and when you need to be specific and said keeping a diary or log is the best way to do that.
"You need to be looking at documenting what portion of your actual costs are work related. So that would be things like internet and mobile phone. Often they're combined so they can say my communications plan costs me $100 a month, how much of that is work related? There's nothing wrong with a reasonable estimate," Denis said.
"Even things like computer consumables [like stationery and printer ink], anything that costs up to $300 you can claim back 100 per cent and if you went and bought a $1500 laptop we calculate depreciation, but you can also claim it over time.
"The overriding issue of course is it's all fine as long as you weren't reimbursed by your employer."
And don't lie on your tax return.
"When you launch your tax return unless something really stupid in it it's just called self assessment. So [for example] if your work-related deductions came to $1,970 and you're due a refund of $847 they'll just give it to you. Unless it's really blatant - the ATO later in the year will check larger deductions and start contacting people and checking," Denis said.
"Just because you get the refund doesn't mean [that's it]. They don't assess them manually. So just a bit of caution and common sense."
ATO app
The ATO has a free app available on the App Store and Google Play that allows you to easily photograph and keep track and catalogue of all your receipts for the year. It even allows you to send the whole lot to your tax agent at tax time to claim.
