New working from home expenses rules for individuals

The Australian Tax Office has announced special arrangements for claiming working from home expenses due to the coronavirus crisis.

The special new arrangement will allow people to claim a rate of 80 cents per hour for all their running expenses, instead of calculating costs for specific running expenses as taxpayers would under normal circumstances. The shortcut method applies to expenses incurred after March 1 2020.

Multiple people living in the same house can claim this new rate individually, and it is no longer a requirement to have a dedicated work from home area in order to claim.

Taxpayers will be able to choose one of three ways to calculate their additional running expenses for the period.

Method 1: Shortcut Method

Claim a rate of 80 cents per work hour for all additional running expenses and the taxpayer:

  • must be working from home to fulfil their employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls
  • be incurring additional deductible running expenses as a result of working from home
  • cannot claim a further deduction for any of the below expenses:
    • electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
    • the decline in value and repair of capital items, such as home office furniture and furnishings
    • cleaning expenses
    • your phone costs, including the decline in value of the handset
    • your internet costs
    • computer consumables, such as printer ink
    • stationary
    • the decline in value of a computer, laptop or similar device.

Method 2: Fixed Rate Method

  • 52 cents per work hour for heating, cooling, lighting, cleaning and depreciation of office furniture
  • calculate the work-related portion of actual cost of phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.

Method 3: Actual Cost Method

  • claiming the actual work-related portion of all running expenses, which need to be calculated on a reasonable basis.

Our tax team says

It is essential to keep a record of hours worked at home; an estimate may not suffice.

Additionally, if you claim expenses in relation to the property eg mortgage interest, property insurance, land taxes and rates, you risk jeopardizing some part of the Capital Gain Tax (CGT) exemption on your principal place of residence.

The ATO will review the special arrangement for the next financial year as the COVID-19 situation progresses.

Contact our team +61 3 9820 6400 to discuss the right approach for you.

Read more at ATO