As we approach the end of the 2020/21 financial year, the Australian Tax Office has indicated that several types of costs associated with working-from-home will not be eligible as a tax deduction.
With so many people working from home through 2020 and beyond, the ATO have issued a reminder that personal and occupancy expenses cannot be claimed.
Personal expenses like tea, coffee and toilet paper that are typically supplied by employers, aren’t directly related to earning income and therefore cannot be claimed by taxpayers who were forced to work from home.
Other ineligible expenses include those related to a child’s education. These include online learning courses and laptops.
The ATO also warned that working from home doesn’t make it a place of business for tax purposes. Employees generally can’t claim rent, mortgage interest, property insurance or rates. The Tax Office also warns that claiming occupancy expenses could potentially expose the home to capital gains tax on sale.
Home Office Expenses
Last year the ATO announced a simplified method of calculating home office expenses and this ‘shortcut’ method has been extended to June 30, 2021. Taxpayers can claim a rate of 80 cents per hour to cover all their running expenses rather than calculating specific costs for running expenses. Taxpayers simply need to record the hours they worked at home on time-sheets or have diary notes. The rate of 80 cents per hour covers costs including:
- Electricity for lighting, cooling, heating and running electronic items
- Phone and internet costs
- The decline in value of a computer, laptop, home office furniture and furnishings.
The shortcut is all-inclusive and can’t be supplemented by additional, individual expense claims on items like phone and internet costs. Taxpayers don’t need to have a dedicated work-from-home area to claim under this method and multiple people in a household can claim using the shortcut method.
The shortcut method is optional and individuals can elect to claim based on the actual expenses incurred but they would need to comply with the more complex, record-keeping requirements. Taxpayers should choose the appropriate method for their circumstances.