Working from home during COVID-19

As a result of COVID-19, we understand that your working arrangements may have changed. Working from home could result in some expenses which you can claim as a deduction at tax time if you have incurred them.

Keeping track of these expenses can be challenging, so they have introduced a temporary shortcut, which will be in place for a limited time. You can use this method to calculate your expenses in a relatively simple way that requires minimal documentation to keep track of. From 1 March until 30 June 2020, the shortcut method had been used in order to reduce the payment process, but now it has been extended until 30 June 2021.

You can use the shortcut method to calculate the expenses for working at home during the period between:

  • 1 March to 30 June 2020 in your 2019–20 tax return

  • 1 July to 30 June 2021 in your 2020–21 tax return.

Depending on when the work pattern returns to normal, they can maybe extend the period. Generally, if you are working from your home as an employee, you will not have to pay capital gains tax (CGT) on any gains made on your home.

This means that you cannot claim deductions for items provided by your employer, or if you have been reimbursed for expenses. If you are not reimbursed by your employer but get an allowance from them to cover your expenses while working from home. This allowance must be included in your tax return as income. You can apply to deduct the expenses you incurred.

If you work from home, you can apply to deduct the extra expenses you incur. These include: Electricity costs related to heating, cooling, and illuminating the area where you work and running the items you use for work.

The expenses you cannot apply for are the costs of coffee, tea, milk, and other general household items that your employer may provide you at work. Costs related to children and their education, including setting them up for online learning, teaching at home, or purchasing equipment such as iPads and desks Items that you reimburse, paid directly by your employer, or items provided by your employer have decreased in value—for example, laptops or mobile phones Time not at work, such as home-schooling children or lunch breaks. The majority of employers do not allow employees to file a tax return for occupancy expenses like rent, mortgage interest, and water and rates.

In the 2019-20 income year, you have the option of calculating home office expenses in three different ways, depending on the circumstances in which you are employed. Shortcut Method and Fixed rate method, Actual cost method.

Shortcut Method (80 cents per work hour) – available 1 March to 30 June 2020 (this method can also be used during the period from 1 July 2020 to 30 June 2021, but that period will need to be claimed in your 2020–21 tax return)

Fixed rate method (52 cents per work hour)

Using a shortcut method is not necessary if you understand the concept. To calculate your deduction, you have the option of choosing one of the existing methods. There are no fixed rules for which methods you may use; as long as you meet the criteria and the record keeping requirements for each method, you can use whatever method or methods will yield the best results.

You can claim a deduction of 80 cents for each hour you worked from home for the period between 1 March 2020 to 30 June 2020 in your 2019–20 tax return and 1 July 2020 to 30 June 2021 in your 2020–21 tax return.

If you work from home to perform your employment duties, rather than just performing minimal tasks, such as occasionally checking emails or answering phone calls, you will incur additional operating expenses due to working from home. The shortcut method does not require you to have a dedicated work area, such as a private study room. The shortcut method covers all additional deductible operating costs, including electricity for lighting, cooling or heating and running electronic items used for work (for example, your computer), and gas heating expenses and the decline in value and repair of capital items, such as home office furniture and furnishings including capital items that cost less than $300 and cleaning expenses, your phone costs, including the decline in value of the handset. Your internet costs and computer consumables, such as printer ink and stationery.

You do not have to bear all these costs to use the shortcut method, but when working from home, you must have incurred additional operating costs in some of these categories. If you use this method, you cannot declare any other expenses for working from home during the period. When you calculate your working hours, you need to exclude any time you took a break from working.

You can calculate your working from home deduction using the shortcut method, with this formula:

Total number of hours worked from home from 1 March 2020 to 30 June 2020 × 80 cents (for the 2019–20 income year)

Total number of hours worked from home from 1 July 2020 to 30 June 2021 × 80 cents (for the 2020–21 income year).

When you claim a deduction using the shortcut method, include the amount in the other work-related expense section of your tax return and include the description 'COVID-hourly rate'.

You must record the time you work from home. This might be schedule, register, diary. Similar documents showing your working hours. If you use other methods, you must also record the number of hours you work from home and the records of your expenses.

Feel free to contact us for any assistance you may require. At Instant Tax Refunds, we strive to provide high-quality service that constantly meets and sometimes exceeds our customers' expectations.

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