Home office tax claims to spike as nation bunkers down to reduce coronavirus

From claims on home office equipment to electricity and internet use, here’s how you can add hundreds of dollars in working-from-home expenses in your next tax return.

Accountants are expecting a big jump in working from home expenses when tax time comes.

Australians could add hundreds of dollars in working from home expenses to their tax claims as the nation bunkers down to reduce the spread of COVID-19.

And the National Tax & Accountants’ Association (NTAA) says now is the time to start keeping your receipts and records to make life a lot easier come tax time.

NTAA spokesman Andrew Gardiner said the industry was expecting a “prodigious” spike in working from home-related claims this financial year.

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“The big challenge is always about record-keeping, a lot of accountants see people making valid, entitled claims but they just don’t have the receipts or records to substantiate them,” he said.

Mr Gardiner said one of the biggest questions on customer’s minds regarded their occupancy expenses, such as rent, mortgage interest and land tax.

“If you are working from home simply because you have been advised to do so by your employer due to the coronavirus your occupancy expenses are non-deductible,” he said.

“This is a big audit trap for a lot of people – your home office will not be regarded as a dedicated place of business.”

SO WHAT CAN I CLAIM?

The Australian Taxation Office says people working temporarily from home may be able to claim additional running expenses such as heating, cooling and lighting. You can do this by either using the ATO’s flat rate or calculating your actual expenses.

■ To claim the ATO’s flat rate of 52 cents per hour, you will need to keep a record of the time you have worked from home during the income year, or keep a representative four-week diary period to show your usual pattern of working from home and apply this amount to determine your full claim.

■ To calculate actual expenses: see below for information about dedicated work spaces.

Whether you have a dedicated workspace – or are just using the kitchen table – can have an impact on the way you calculate work from home expenses.

■ If you use your phone or internet for work you can claim a deduction for the work-related percentage of your expenses, if you paid for these costs and have records to support your claims. To claim a dedication of more than $50 you need to keep records of a four-week representative period – these include phone and internet bills from which you can identify work-related calls and internet data downloads.

Mr Gardiner said many people were less likely to claim actual internet usage, because it could be difficult to separate work data downloads from personal ones, and those of other people in your household.

■ For purchases made towards your home office that are under $300, the entire amount can be written off in one tax return.

■ You can also claim the work-related decline in value of home office equipment or repairs needed, along with things such as printer paper, ink and stationery.

ARE THERE DIFFERENCES IF I DO/DON’T HAVE A DEDICATED WORK AREA?

Yes, if you want to calculate actual expenses for things such as heating, cooling and lighting.

If you do have a dedicated work areas you need to work out a) the cost per unit of power used, b) the average units used per hour (power consumption by kilowatt) for each appliance or light used c) the total hours for work-related purposes spent at home.

You must also take into account the use of these area by other members of your household and apportion expenses accordingly.

The ATO has a depreciation tool, which can help you calculate the decline in value of equipment and furniture.

If you don’t have a dedicated work area, the additional expense for lighting, heating, cooling and electricity should be calculated by determining the actual cost of running each unit you used per hour and multiplying that by the hours you spent working at home. Generally, the amount of additional expense will be small.

WHAT CAN I DO NOW TO MAKE TAX TIME EASIER?

Keep all your records and receipts up to date and filed or saved in one place.

“If you can keep your records in electronic form, try to do that and keep all the information in a file that is readily available,” Mr Gardiner said.

“If you only have hard copies, take photos of them and file them with electronic receipts.

“Maintain a diary of when you started working from home, and the hours, so you can give yourself an idea of your work hours down the track.”

For more information visit the ATO website.