March 24, 2020

Working From Home Deductions

Following the significant increase of people working from home, we are expecting the number of claims made to the Australian Tax Office for home office expenses to follow suit. The following items can all be claimed depending on your home set-up:

Work related phone and internet expenses

  • Decline in value of a computer (work related portion)
  • Decline in value of office equipment
  • Running expenses (prior to the COVID-19 crisis) – including but not limited to home office equipment, heating, cooling, lighting and cleaning costs. In order to claim a portion of running expenses your home set up needs to have a dedicated work area. Prior to the COVID-19 crisis there were two methods to claim running expenses either a flat rate of 52 cents an hour for every hour worked from home or through recording your actual expenses and applying a business percentage.
  • From 1 March 2020 the ATO has introduced an additional, temporary method of claiming running expenses. Taxpayers are now able to claim a deduction of 80 cents for every hour worked from home. Taxpayers are not required to have a dedicated work area in their home to claim this deduction. To be eligible for this deduction you need to have been working from home to fulfil your employment duties and incurred additional running expenses. Deductions can be claimed using this method for the period 1 March 2020 – 30 September 2020.
  • Occupancy expenses – including rent, mortgage interest, property insurance, land taxes and rates. To be eligible to claim a portion of these expenses your home has to be your principal workplace with a dedicated work area. These expenses can only be claimed in very limited circumstances.

In respect of the records that need to be kept now:

  • If you choose to claim the flat rates of 52 cents per hour or 80 cents per hour then diary entries should be made of the hours worked from home; or
  • If you choose to claim your actual expenses and apply a business percentage then you can either record the actual number of hours worked at home or keep a representative 4 week diary. You will also need to keep a record and receipts of all running expenses incurred.

Deductions for Protective Items (gloves, face masks, sanitisers etc)

You may be able to claim a deduction for gloves, face masks, sanitiser, anti-bacterial spray and other protective items that you use in your business in response to COVID-19. In order to be able to claim these as deductions the items purchased must have a sufficient connection with the risks associated with earning your assessable income and receipts must be kept.

How can we help?

If you need assistance with understanding any of these recent announcements, please feel free to give Brentnalls NSW a call so that we can discuss your particular requirements in more detail.