Working from home – what am I eligible to claim and how do I claim it?

If you work from home, you’re probably familiar with the streamlined rules for claiming work from home expenses. You might also find it a bit confusing, given there are now three ways to claim your working from home expenses:

1. Shortcut method
2. Fixed rate method
3. Actual cost method

 

The Shortcut method

This method is likely to be the most used, because there are more people working from home who didn’t previously.

To qualify for the shortcut method, you must be working from home and incur additional running expenses. As an example, if your computer at home has only ever been used for personal purposes but is now being used to fulfil your employment tasks, it would be classed as an additional running expense. To clarify, the ATO states that working from home is work that is “substantive and directly related to the taxpayer’s income-producing activity.” Occasionally checking emails or taking calls while at home does not qualify.

The Practical Compliance Guide (PCG) 2020/3 outlines all additional running expenses:

• electricity (relating to lighting, cooling/ heating and electronic items used for work, e.g. a computer) and gas (heating) expenses;
• the decline in value and repair of capital items (such as home office furniture and furnishings);
• cleaning expenses;
• phone expenses (including the decline in value of a phone handset);
• internet expenses;
• computer consumables;
• stationery; and
• the decline in value of a computer, laptop or similar device.

Other key elements of the shortcut method to note are:

• you do not need to have a dedicated work area (unlike the other two methods);
• employees on leave or stood down, or business owners whose businesses have ceased trading permanently do not qualify;
• the 80-cent rate has now been extended until 30 June 2021;
• you will need to keep a record of the hours worked at home – in the form of timesheets, roster or a diary.

 

The Fixed rate method

 The fixed rate method is 52 cents for each hour worked at home and is intended to cover the following expenses:

• the decline in value of home office furniture and furnishings – e.g. a desk;
• electricity and gas for heating, cooling and lighting; and
• the cost of repairs to home office equipment, furniture and furnishings.
• However the 52 cents does not cover:
• phone expenses;
• internet expenses;
• computer consumables and stationery – such as ink; and
• decline in value of equipment – such as phones, computers and laptops.

If you want to claim on these expenses, you would need to calculate the work-related use separately (ie. What portion of their use is for work vs for personal). This also makes it more complicated because you’ll need to provide receipts, diaries, phone accounts, etc.

Other key elements of the fixed rate method to note are:

• you must have a dedicated work area, such as a home office;
• you must record the actual hours worked – there is an option to record a four-week period which could then be extrapolated over the remainder of the year. If work patterns change, however, a new work record will be required.

 

The Actual cost method

This method will likely be the least used, as it is only relevant to you if you have a home office. As it’s name suggests, if you were using the actual cost method, you would work out your deduction from the actual costs incurred as a result of working from home.

The ATO has classified a home office as:

• an area clearly idenfitiable as a place of business and is regularly used for visits by clients or customers;
• an area used exclusively or almost exclusively for work purposes; and
• an area that is not readily suitable or adaptable for private or domestic purposes.