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COVID-19 Tax Deduction: Working from Home Expenses
With millions of people working from home the Australian Tax Office has provided guidance to help taxpayers get the deductions they deserve for the extra expenses they have incurred.
Can you claim COVID-19 tax deductions? So far Australia has avoided the worst of the COVID-19 pandemic by restricting the opportunities for people to get infected. A significant aspect of this `lockdown’ is the part that businesses play by suggesting or insisting that people work from home. According to a survey 88 per cent of organisations have their people working from home. While working from home keeps people safer by not exposing them to infection, it also brings additional costs.
For example, many people have had to go out and buy desks and chairs as working eight hours a day from home is quite different from doing a couple of hours work in the evening on the lounge. And as the weather gets colder, they may need to heat the house during the day when they might otherwise have been at the office. They probably have the lights on for longer than they would have before the pandemic. They are likely to be also providing their own internet bandwidth.
COVID Tax Deductions?
There are a series of expenses that people working from home incur that are normally covered by the business when they work in their normal place of business. The Australian Tax Office (ATO) has always allowed people to claim tax deduction for expenses incurred by working at home. And the rules that applied in the past still apply under the pandemic.
Making it easy
But now to cope with the pandemic, the ATO has made it easy for people to claim a basic level of deductions. If a person is working from home due to the COVID-19 pandemic, they can claim 80 cents per hour they work at home as part of the COVID-19 tax deductions. The main requirement is that the person keep a record of the hours they worked at home.
This may sound like generous COVID-19 tax deduction, but it works out to only $32 for a 40-hour week. This amount is to cover all expenses including telephone calls, internet fees, any additional power costs, cleaning costs, depreciation costs, stationery and computer consumables such as paper and ink or toner.
The ATO has another method for people who think they are spending more than 80 cents an hour. There is a flat deduction of 52 cents per hour for every hour worked at home. On top of that the person can claim the actual work-related costs of internet and phone expenses, computer consumables, stationery and the work related portion depreciation of the laptop or computer (if they are using their own device).
To claim these extra amounts, the person will need to keep a record of the hours they worked at home as well as detailed records on the other expenses. This can be quite complex. For example, if you sometimes print the kids’ assignment on your home printer, you will have to work out what percent of the printer cost is for private use and what percentage for business use.
Still not enough?
Rather than use either of the flat rates, a person can also go ahead and calculate out all the costs of working at home. This takes a lot of work and requires keeping detailed records. For example, the calculations to apportion costs between private and work for heating and cooling will involve also looking at what other people in the house are doing.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.