There’s an unprecedented number of people working from home due to the Corona Virus with workplaces across Australia adopting a work-safe policy to keep their staff safe. This means an increase in your utility costs, as well as using your personal equipment to do your job.
People who normally work in an office might not realise some of the tax benefits. It might be time to start collecting those receipts and get a start on your tax time deductions.
Back yourself up
There are a range of tax deductions that can be made when you work from home. When you claim, it’s important to remember that you must have already incurred the cost, the expense must be directly related to earning your income and you must provide evidence to prove your expense.
Pro tax tip: Keep your receipts. Bank statements don’t have enough information to prove your expense to the ATO. You don’t have to keep paper copies. A good quality electronic version can be used provided the digital copies are a true and clear reproduction of the original paper record.
What are some tax time benefits?
If you work from home, you’ll be able to claim work-related household expenses, which include:
- Cleaning, maintenance and repair costs related to your work area, home office equipment, furniture and furnishings
- Utility expenses, such as heating, cooling and lighting
- The work proportion of your Internet and phone / mobile phone related expenses
- Depreciation on your home office furniture, fittings, office equipment and computers
- Small capital items, such as office equipment, furniture and computer equipment which cost less than $300 can be automatically deducted. They don’t need to be depreciated.
- Office stationery, printers, printer ink
How do you calculate your deductions?
Keep a log book or diary! Keeping a log book or diary isn’t just limited to tracking your car expenses for tax purposes. The Australian Taxation Office requires you to keep a diary to track your home office work-related expenses as well. The diary should detail the time your spent in your office compared to personal time spent in your home and will need to be kept for a four week continual period. The work-related portion of expenses is then averaged out over the year.
Working out your cleaning expenses however would be calculated based on the floor area of the home office as compared to the rest of the home. The cost of heating, cooling and lighting would be worked out based on calculating the cost per unit of power from your bills. The appliances and lights used in the home office would need to have their power consumption per hour estimated and multiplied by the tariff per kilowatt hour charged by your supplier. This is often the best way to maximise your tax deductions as it often produces the larger deductions because the record-keeping requirements are more rigid.
Pro tax tip: If your working-from-home time spikes because of the Corona virus, keep a separate diary to detail your costs relating to this period to justify your larger claim this year. Don’t average this cost out throughout the year.
Rate per hour
If that all sounds too complicated then the rate per hour method is for you. Under this method you still maintain a 4 week consecutive diary listing the number of hours you work from your home office per week and you multiply the annualised number of hours by a fixed rate of 52 cents per hour. This rate is to cover all of your home office expenses, which include heating, cooling, lighting and decline in value of office furniture instead of keeping a record of the actual cost.
In addition to claiming 52 cents per hour, you can also make a separate claim for:
- phone and internet expenses
- computer consumables and stationery
- depreciation of computers or other equipment (but not furniture, desks, cabinets or furnishings).
Pro tax tip: Ideally, you should have a dedicated home office space, but if you don’t, there’s no need to worry. Simply claim your work-exclusive hours when the room is not shared by others in the home.
Download our Home Office Dairy to help you stay organised
Every person’s circumstances are different. If you’re not sure whether you fit the criteria for certain work-from-home tax deductions, always seek the advice of your tax agent. If you are provided any equipment by your employer or are reimbursed for your expenses, you cannot make these claims on your tax return.
ITP consultants are taking every precaution to stay safe during this time and are available to help you. It you’re uncomfortable coming into a branch for your appointment, our Professionals can conduct your appointment over the phone or via email.