Episode Details

With most people being required by their employer to work from home, I thought it would be timely to update you on what deductions you can claim and what evidence you need as substantiation.

Start keeping record now

Remember, the onus of proof is on the taxpayer to substantiate any deductions they claim. If you use a tax agent, you probably won’t have to lodge this year’s income tax return until March 2021. How likely is it that you will remember everything you did and all the purchases you made in March 2020, one year from now? Unlikely right. Therefore, its best to start keeping records now.

Expenses you may be entitled to claim

Here’s a list of expenses you can typically claim.

Running costs

These expenses include heating, cooling, lighting, cleaning, and so on. There are two methods you can use to calculate this deduction:

1. Fixed rate - You can claim a deduction of 52 cents for each hour you work from home instead of recording all of your actual expenses for heating, cooling, lighting, cleaning and the decline in value of furniture. You can either keep a record of the number of hours you have worked from home during the coronavirus period. Or, if you regularly work from home, you can keep a diary for a representative 4 weeks; or

2. Actual costs – You can use this method if you have a dedicated workspace and you can accurately apportion costs such as power, heating, cleaning and depreciation. You still need to keep a 4-week diary or actual record of hours worked to support your calculations.

Obviously, for most people, the fixed rate option is the simplest. More information is available on the ATO’s website here.

Consumables

Items such as software subscriptions, stationery, paper for your printer and printer ink can be tax deductible. You must retain receipts as evidence.

Mobile phone & internet expenses

There are two methods available to use to determine your tax deduction for mobile phone usage:

1. A total deduction of $50 with limited documentation required. This method is appropriate when your device usage is incidental; or

2. Claim a proportion of actual expenses. To work out the actual work-related proportion, you need to consider the amount of usage solely for work compared to the overall usage. Usage could include functions such as voice calls, text messages, data and app usage. You need to keep a diary for a representative four-week period to support your claim.

Computer and office equipment

If the cost of the equipment is less than $300, then you can claim a full deduction in the financial year the purchase was made. If the equipment costs more than $300, you must depreciate the item over its useful life. Note, if any equipment purchased is partially used for private use purposes, you will need to apportion the depreciation for its work use percentage.

Expenses you may not be entitled to claim

Here is a list of expenses that you are not able to claim.

Rental expense or mortgage interest (occupancy expenses)

Generally, you cannot claim a deduction for interest cost or rent paid in respect to a home office. However, if dedicated portion of your home is your principal workplace, then you can claim a portion of occupancy expenses. Generally, you would apportion the work-related and non-work-related expenses by floor area.

Travel between home and work

Generally, you are not entitled to claim a deduction for the cost of travel between work and your home office e.g. if you n