Working from home because of the virus? Don’t forget these tax deductions
As more Australians adjust to working from home amid increasingly draconian measures, accountants are reminding workers to track their expenses before tax time.
Even before the closure of pubs, gyms and cinemas, employers were encouraging or mandating thousands of employees to make the switch.
People acquainted with working in an office were struck by nationwide stationery shortages and an NBN network pushed to its limit with spiking traffic.
Others more fortunate received much-needed assistance after a number of telco providers announced relaxed mobile and internet data limits.
But workers across both groups are most likely paying additional operating costs.
Which is why H&R Block Director of Tax Communications Mark Chapman said now’s the time for workers to add one five-minute task to their daily routine: Bookkeeping.
“If you’re incurring any expenses as a result of working from home and you’re not being reimbursed for those expenses by your employer, then you should be able to claim a tax deduction for those costs,” Mr Chapman said.
How to monitor your expenses
According to Mr Chapman, there are two ways workers can tally up their expenses, but both have vastly different outcomes.
The first is by claiming the ATO’s fixed rate allowance of 52 cents per hour, based upon the average amount workers spend on energy bills and home office furniture.
“It’s simply a case of using a diary to keep a record of all the time you spend working from home,” Mr Chapman said.
So if an employee spends eight hours a day at work for 30 working days, they would accumulate $124.80 in running expenses.
Additionally, they would still need to keep evidence for other items like internet usage, mobile phone expenses, stationery, and depreciation on computers and other office equipment.
The second, more complicated method is by claiming actual expenses.
This involves the rigorous upkeep of all expenses incurred while working from home, in addition to new equipment purchases and phone bills where work-related calls are identifiable.
Mr Chapman said workers need to identify a “working area” in their home – whether it be a dedicated study, section of their living room or bedroom.
“You then need to keep all of your receipts. So every utility bill, every receipt for extra toilet rolls and cleaning materials you’re using, and then figure out the work-related proportion of that,” Mr Chapman said.
What you can and can’t claim
Common mistakes about working from home
Mr Chapman says the two biggest mistakes people make when lodging a home office claim are claiming too much, and not having the required receipts and bills if the ATO probes their expenses.
“You have to be precise working out what your working area is and sticking to it,” Mr Chapman said.
“So you can’t claim the total of your home internet bill, your whole mobile phone bill and so on – you can only claim the proportion related to your work activity.”
According to ATO advice, workers operating out of a home office should maintain a diary for a four-week period.
But Mr Chapman said given the unique nature of the indefinite quarantine, and the fact many workers have divided their year between a city and home office, that diary should last for the duration of their homebound stint.
“A four-week diary would not give you a representative proportion over the whole year,” Mr Chapman said.
“We haven’t worked from home for nine months (of the tax year) and now we’re doing so full time,” Mr Chapman said.
“So it’s probably worthwhile keeping a diary for the whole period – it might be more complicated and involve more work, but it’s all about dotting the Is and crossing the Ts.”