Tax deductions extended for Australians working from home

It will be easier for Australians working from home to make a tax claim, but experts fear the system might leave workers short changed.

Australians working from home have secured an extension of a simplified way of claiming tax deductions but experts have warned you could end up short changing yourself if you don’t keep receipts.

The Tax Office announced the changes earlier this year to help make it easier for thousands of workers who were sent home from the office during COVID-19 shutdowns.

The temporary arrangements allow taxpayers to claim a rate of 80 cents per hour by keeping a record of the number of hours they have worked from home, rather than needing to calculate specific running expenses.

The “shortcut” method was scheduled to expire in July, prompting the ATO to extend the arrangements until December 31, 2020.

Assistant Treasurer Michael Sukkar welcomed the move on Thursday, but reminded workers they can still choose to use the alternative method.

“These continuing arrangements do not prohibit Australians from making a standard working from home claim using the two standard approaches should they wish to do so,’’ Mr Sukkar said.

The short cut deduction method is designed to help the vast majority of workers who are new to working from home and are not used to keeping detailed records of work expenses.

The ATO’s Assistant Commissioner Karen Foat has confirmed it’s designed for people who haven’t worked from home before to streamline how to claim.

“The shortcut method provides a rate of 80 cents per hour and will only require you to keep a record of the number of hours worked from home,” Ms Foat said.

“This recognises that many taxpayers are working from home for the first time and makes claiming a deduction much easier.”

But experts have warned the new 80 cents per hour method to claim work-related expense tax deductions could result in lower returns.

Assistant Treasurer Michael Sukkar.

Tax agents H&R Block’s Mark Chapman sounded the alarm in June that some workers will be better off using the old system.

“The 80 cents shortcut rate is a nice simple calculation, but generally speaking, claiming your actual costs will give you a much bigger deduction,” Mr Chapman said.

“It could be potentially several times larger, depending on the things you claim.

“If you’ve got all your records, if you’ve kept all your receipts, it is worth having a chat to your tax agent to potentially itemise all the individual items you’ve spent money on.”

If you work from home, you can claim the work-related proportions of household costs such as: heating, cooling and lighting bills, costs of cleaning your home working area, depreciation of home office furniture and fittings, depreciation of office equipment and computers, costs of repairing home office equipment, furniture and furnishings, small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately, computer consumables and stationery, phone and internet expenses

“Ideally, you should have a specific room set aside as a home office. If you are using a room with a dual purpose (e.g. dining room), or a room shared with others (e.g. lounge room) you can only claim the expenses for the hours you had exclusive use of the area,’’ H&R blocks advice states

“Alternatively, you can claim the actual costs you’ve incurred. You’ll still need to keep a diary of your home working and you’ll also need to work out the amount of your home (by floor area) that you’re using as your work space. From this, you can then work out the work-related proportion of your household expenses and apply this percentage to the actual amount you spend on electricity, gas, water, phone and internet, etc.”

Further information about these new arrangements.

If you require urgent assistance with your tax affairs due to COVID-19 you should contact the ATO’s Emergency Support Infoline 1800 806 218.