The COVID-19 crisis has seen a dramatic change to the working arrangements of the everyday Australian.

Last year, the government introduced a temporary shortcut method to allow those of us working from home to easily claim a deduction for increased costs until 30 June 2020.

This method has recently been extended to apply up until 30 June 2021. When preparing your income tax return for the 2021 financial year, consider the options we have summarised below when claiming your home office expenses.

Note that the simplest method may not produce the highest income tax deduction. As such, if you have the documentation and support, it is recommended to work through all methods.

Shortcut (Alternative) Method

For the 2021 financial year, this extended approach allows a claim of a flat 80 cents for every hour worked from home between 1 July 2020 and 30 June 2021.

The ATO will review the appropriateness of this method beyond 30 June 2021, depending on when or if work patterns change.

The criteria for the worker includes:

• employment duties being fulfilled and not just the carrying out of minimal tasks such as occasionally checking emails or taking calls; and
• additional, deductible running expenses being incurred as a result of working from home.

The shortcut method rate is designed to cover all deductible running expenses, including:

• electricity for lighting, cooling or heating and running electronic items used for work, and gas heating expenses;
• the decline in value and repair of capital items, such as home office furniture and furnishings;
• cleaning expenses;
• phone costs, including the decline in value of the handset;
• internet costs;
• computer consumables, such as printer ink;
• stationery; and
• the decline in value of a computer, laptop or similar device.

The only records required to be kept are timesheets or diary notes of the number of hours worked from home.

Multiple people living in the same house can claim this rate individually and a dedicated work-from-home area is not required.

Actual Cost and Fixed Rate (Existing) Methods

Whilst the shortcut method may be the simplest to utilise, many workers may find it advantageous to continue using one of the previously existing methods, despite the additional calculations and record-keeping requirements.

Actual Cost

This involves claiming the actual work-related portion of all running expenses, calculated on a reasonable basis and substantiated through receipts and diaries.

Fixed Rate

For this method, the worker can claim:

• a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture;
• the work-related portion of actual costs of phone and internet expenses, computer consumables, stationery; and
• the work-related portion of the:
  • decline in value if over $300; or
  • full cost if up to $300,

of a computer, laptop or similar device and other equipment.

To claim using this method, records to be kept for the hourly rate must show either:

• actual hours spent working at home for the year; or
• a diary for a representative four-week period to demonstrate the usual pattern of working at home, applied across the remainder of the year. A change in work pattern will require the creation of a new record.

All other expenses are subject to separate calculations and substantiation.

Substantiating Claims

It is also important to note that the taxpayer claiming the working from home tax deductions must:

1. have spent the money and not been reimbursed;
2. only make a claim that is directly related to earning income; and
3. hold the relevant records to substantiate the deduction.

Learn More

For more information contact your Pilot Advisor or Kylee Smith at ksmith@pilotpartners.com.au or via phone (07) 3023 1300.