ATO introduces new working from home deduction scheme

COVID-19 is forcing many businesses to work from home, meaning that you now have to pay for expenses such as heating and lighting that were previously covered by employers.

The ATO has introduced a new ‘shortcut method,' where you can claim additional running expenses at a rate of 80 cents for each hour you work from home as a result of COVID-19.

Deductible running expenses include:

• Utilities such as heating, cooling and lighting.
• Cleaning costs for your work area.
• Mobile or landline phone expenses for work calls.
• Internet connection.
• Computer consumables and stationery.
• Repair costs for home office equipment and furniture.
• Depreciation of home office equipment, computers, furniture and fittings.
• Small capital items such as a computer (purchased for the purpose of working from home) can be claimed if they cost under $300. If the cost exceeds $300, the decline in value can be deducted.

The shortcut will apply from 1 March 2020 to 30 June 2020. A record of hours worked such as timesheets or rosters must be kept as proof. If you only undertake minimal work tasks from home such as occasionally checking emails or taking calls, then you are not eligible for the deduction. To claim the deduction, you must specify your claim with the note “COVID-hourly rate” when lodging your upcoming 2019-20 tax return.

There are two pre-existing alternative methods to claim working from home deductions that individuals may choose to use, however, they are generally more tedious:

• One way you can file a claim on your expenses is the actual cost method, where you keep a diary that details the work portion of your household running expenses. This can include receipts and documents supporting your claim. If you don't provide supporting documents displaying the portion of expenses that were incurred for work, the ATO may reject your claim.
• The fixed-rate method allows you to claim a fixed rate of 52 cents per hour worked. This applies for electricity and decline in furniture expenses, but a separate claim can be made for phone and internet expenses, the depreciation of office equipment and computer consumables and stationery.

These deductions are only eligible for the proportions of the expenses that are actually used for work purposes. For example, if you're using your own phone to make work calls, then only the portion of the bill that was incurred due to work calls can be claimed. If the room you are working in is shared with others, you can only claim electricity expenses for the hours you were exclusively using that room for work purposes.

Expenses such as rent, mortgage and insurance cannot be claimed unless you have a permanent home office.