Find out what you need to know about claiming your "working from home" expenses in this years tax return
This tax time will not be the same as we know it, even the ATO (Australian Tax Office) is preparing for a tax time like no other.
Due to the lockdown many people have had to work from home, which raises the question among many of you, how do you claim all expenses associated with your "home office" and what exactly can you claim?
Having said that, it's good to know that the ATO has created a new simplified system for deductions related to working-from-home expenses. With this simplified system, all taxpayers who work from home can claim 80 cents per hour for all of their running costs. This method has a much more minimal record keeping requirements in comparison to the claiming of individual expense items.
However, this temporary shortcut method is valid from the 1st of March to the 30th of June 2020 only. Depending on when work patterns return to normal, ATO may extend this method for another specified period.
Tips for claiming working from home expenses in 2020
What you should do
Know what you can claim
To claim a deduction for working from home, all of the following must apply:
- the money must have been spent by you
- the expense must be directly related to earning your income
- you must have a record to prove it.
You can't claim a deduction for items provided by your employer, or if you have been reimbursed for the expense.
If you are not reimbursed by your employer, but receive an allowance from them to cover your expenses when you work from home, you must include this allowance as income in your tax return and you can claim a deduction for the expenses you incur.
Generally, you can claim internet, phone, printing consumables, and stationery supply expenses. You may also be able claim other expenses such as cooling, cleaning costs etc.
Keep all records to prove your expenses
When using the simplified shortcut method, you must have record of the dates and hours you have worked from home as evidence of your claim. If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses.
It is recommended you keep a timesheet, roster, diary, or similar document that sets out the hours you worked from.
Double check your claims and be careful
Make sure, you only list the actual costs you had. It can be expected that the ATO will be looking extra closely at all the work-related expense, due to the high number of people workig from home.
What you should not do
Do not claim expenses you can’t claim
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.
Do not claim the full expense if it's also for personal use
This is mainly regarding the cost of your internet and phone bills, you can only claim the usage that’s actually work-related. This can be tricky so make sure you keep track of your usage. Seeking the advice of a registered accountant would help you find the reasonable amount for your claims.
Tax is probably the last thing on your mind when you’re embarking on your adventure in Australia, but you should know that while working there, you’re taxed on your earnings.
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The Australian financial year runs from the 1st July to the 30th June, so make sure you have enough time to arrange the procedures and prepare all the paperwork needed for the tax return process.