With more of us now self-isolating and working from home due to the COVID-19 outbreak, we’ve had to overhaul our living spaces and budgets to get by. While many of us have made some major adjustments to work remotely, least of all to our daily habits, we’re also undoubtedly going to incur some additional outlays to set up work spaces and continue business activities from home. The good news is that you’ll be able to claim most of these expenses back at tax time.
What are the rules for claiming expenses when you work from home?
Can I claim my utility bills on tax if I’m working from home?
According to H&R Block Director of Tax Communications, Mark Chapman, you can claim the work-related portion of your household running costs as tax deductions, including:
- energy bills (heating, cooling and lighting)
- phone (mobile and landline) and internet expenses
For anyone working remotely and for tax purposes (and your sanity), Mr Chapman’s advice is to set up a specific room of your home as a dedicated work space or office.
“If you are using a room with a dual purpose like your dining room for example or a room shared with others like your lounge room, you can only claim the expenses for the hours you had exclusive use of the area,” he said.
Having a dedicated work space at home can also help with staying on task and to avoid distractions like that laundry basket that’s been starring at you all day or your dog giving you puppy eyes to go for a walk.
Can I claim my office equipment and stationery on tax?
Generally, you can claim the full value of small capital items (i.e. computers, stationery etc.) of up to $300 as a tax deduction or alternatively the depreciation of assets over that amount. This can include home office furniture like desks and chairs, fittings and general office equipment.
Here are some other home office expenses you can claim back on tax:
- Costs of cleaning your home work space
- Costs of repairing your home office equipment, furniture and furnishings
- Computer consumables (i.e. printer paper, ink etc.)
The first step to maximising your tax refund for your remote work is to log your home working hours and expenditure in a diary. Make sure you keep copies of all your receipts and bills, so you don’t have to try and recreate things retrospectively when tax time comes. You don’t want to miss out on deductions you’re entitled to because you weren’t organised.
What are some uncommon expenses I can claim if I’m working from home?
As a general rule, you can claim costs that directly relate to your working activities at home. This means that any expenses regarded as private or domestic in nature aren’t tax deductible.
Let’s take cleaning products as an example. Keeping your home work space clean is a direct cost to you imposed by the requirement of working from home. So, cleaning products are tax deductable, but only to the extent that they’re used to keep your working space clean. The rest of your cleaning products for home? Not deductible.
“The extra toilet paper that you now require as a result of working from home should also be claimable, because again this a question of basic hygiene,” said Mr Chapman.
“Food and drinks like tea, coffee, or lunch meals are not claimable because they are regarded as discretionary expenses – in the same way that you can’t claim a deduction for the cost of a coffee or sandwich if you leave the office to buy one at lunchtime.
“You aren’t typically incurring any additional costs – you’d still have to eat lunch whether you’re at home or in the office, and either way it isn’t deductible.”
How do I claim home work-related expenses on tax?
Claiming tax deductions for working from home due to coronavirus has just been made easier.
The Australian Taxation Office (ATO) is introducing a new flat rate allowance of 80 cents per hour (previously 52 cents per hour) for your running expenses if you’re working from home. This is by far the simplest way to claim your home work-related expenses on tax.
This ‘rate per hour’ method just requires you to keep records of your actual hours spent working at home (including start, finish and break times) for at least four weeks and will allow you to claim 80 cents per hour for each working hour. This change will apply from March 1 to June 30, after which the tax office will re-assess arrangements for the next financial year as the COVID-19 situation unfolds.
In addition to that, Mr Chapman said you can make separate claims for a proportion of items like your home internet, mobile phone costs and any other expenses that directly relate to your work. This also includes consumables like stationery, printer ink and even additional toilet rolls that you wouldn’t otherwise have purchased if you were working from your normal workplace.
The second method is to claim your actual expenses rather than the flat rate, but the amount of paperwork you’ll need to keep (i.e. invoices, receives etc.) is more substantial. This will also involve keeping a diary of your expenses and doing some maths to calculate the percentage of your household running costs relating to working from home.
Let’s take depreciating office assets as an example. If you wanted to claim the decline in value of your work phone and computer, you’d need to determine the percentage of time in the financial year you used them exclusively for work.
Separately, to claim maintenance costs, you’d need to add up your cleaning expenses before multiplying that total cost by the floor area of your dedicated work area.
To claim utility bills like heating, cooling and lighting, you’d need to work out your cost per unit of power used, the average units used per hour for each appliance, equipment or light used and the total annual hours used for work-related purposes.
On top on this, you’ll also have to take into account how other members of your household used the home office and apportion your expenses accordingly. You can visit the ATO website for more details.
How much can I claim back on tax?
There’s really no limit to how much you can claim, although keep it within reason. You can claim whatever you’re entitled to, providing you calculated your home work-related expenses in accordance with ATO guidelines and that you have the necessary substantiation to back up your claim.
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