Working from the kitchen bench? Here’s how you sort your tax
With the end of financial year not far ahead, the Australian Taxation Office is reminding taxpayers how best to navigate working-from-home deductions.
The temporary shortcut method has been flagged as a method to consider this tax time.
The working-from-home shortcut method allows claims at the all-inclusive rate of 80 cents per hour, rather than needing to do complex calculations for specific items. It can be claimed by multiple taxpayers living under the same roof and, unlike existing methods, does not require a dedicated work area.
The shortcut method is straightforward; just multiply the hours worked at home by 80 cents.
The only proof required is a record of the number of hours you’ve worked from home, such as a timesheet.
That being said, taxpayers can still claim under the existing arrangements if they choose. If you decide to use an existing method, we encourage you to consult with the team at Allan Hall before you embark and keep good records. Keeping track of each individual expense and calculating the work-related use of each one can be fiddly, so be organised.
Three methods for claiming expenses
To claim any work-related expense, you must have spent the money yourself and not have been reimbursed. The expense must be directly related to earning income (not a private expense), and you must have kept any necessary records (a receipt is best). There are three ways to do this:
- Claim a rate of 80 cents per work hour at home for all your working from home expenses — this is the shortcut method
- Claim a rate of 52 cents per work hour at home for the heating, cooling, lighting and cleaning of your dedicated work area and the decline in value of office furniture and furnishings. Then calculate the work-related portion of your telephone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device, or
- Claim the actual work-related portion of all your running expenses, which needs to be calculated on a reasonable basis.
Four no-go expense areas
The ATO has reminded us that if a taxpayer chooses to claim their working from expenses through the fixed rate or actual cost methods, they can’t claim the following:
- Personal expenses like coffee, tea and toilet paper. While they might normally be supplied by your employer, they still aren’t directly related to earning your income.
- Expenses related to your child’s education such as online learning courses or laptops.
- Large expenses up front. Any asset costing over $300 (either in total or per item) such as a computer, can’t be claimed immediately. Instead, these claims should be spread out over a number of years.
- Employees generally can’t claim occupancy expenses such as rent, mortgage interest, property insurance, land taxes and rates. Working from home does not mean your home is a place of business for tax purposes. If you claim occupancy expenses, you may have to pay capital gains tax when you sell your home, even if it is your main residence.
More information about working from home is available from ato.gov.au/home or contact Allan Hall’s Tax & Accounting specialists in Brookvale on 02 9981 2300 for specific advice about your circumstances.