RSM Australia

Employee Home Office Expenses

Insights for Individuals

Due to the spread of COVID-19 and Government lockdown measures, most employees across Australia are relishing in the flexibility of being able to work from home. While businesses adapt to the unprecedented mass work from home environment, with 30 June 2020 looming, many employees are left asking ‘what deductions can I claim in my tax return?’.
 

Whether you’re working from a home office or on the dining room table, certain costs that you incur as an employee while working from home are deductible.

Tax return 1. Shortcut Method:

Deduction for home office expense of 80 cents per hour you worked from home.

The ATO introduced the shortcut method as a response to the vast number of people forced to work from home during the COVID-19 lockdown period. There is no requirement to use this method, an employee can continue to use one of the previous two methods should they choose (refer below).

The shortcut method provides for a deduction of 80 cents per hour for each hour you worked from home during the period 1 March 2020 to 30 June 2020.

What does it cover?

The shortcut method intends to cover all additional running costs including:

  • Electricity, cooling, heating, etc.
  • Repair and decline in value of capital items such as furniture, fittings, computer hardware, etc.
  • Phone and internet costs
  • Consumables and stationery
  • Cleaning

If you use the shortcut method, you are unable to claim any additional working from home costs during the period 1 March to 30 June 2020.

Am I eligible?

You will be able to use the shortcut method if you meet the following eligibility criteria:

  • You were required to work from home during the period 1 March 2020 to 30 June 2020.
  • Tasks undertaken at home were meaningful and not merely checking off the occasional email or taking ad hoc calls.
  • You have incurred additional running costs as a result of working from home.

There is no requirement for you to have a dedicated office area to claim a deduction under the shortcut method.
 

2. tax returns Fixed-Rate Method:

Deduction for home office expense of 52 cents per hour you worked from home.

What is INCLUDED:

The fixed cost method covers the following additional running costs:

  • Electricity, cooling, heating, etc.
  • Repairs to home office equipment, furniture and fittings
  • Decline in value of home office furniture and fittings

What is excluded:

  • Phone and internet costs
  • Consumables and stationery
  • Decline in value of home office equipment such as computers, laptops, phones, etc.

Am I eligible?

You will be able to use the fixed cost method if you meet the following eligibility criteria:

  • You have a dedicated working from home area such as a study or office,
  • You are required to perform duties as an employee at home from this area, and
  • You meet the substantiation requirements.

3.tax Actual Cost Method:

Claim a deduction for the actual expenses directly incurred in working from home.

What does it cover?

The actual cost method covers the following additional running costs:

  • Electricity, cooling, heating, etc.
  • Repair and decline in value of capital items such as furniture, fittings, computer hardware, etc.
  • Phone and internet costs
  • Consumables and stationery
  • Cleaning

Am I eligible?

The eligibility requirements are similar to those for the fixed cost method; however, you do not specifically need a dedicated work area.

Where you do not have a dedicated work area the deductions you can claim are limited as you will generally only incur minimal additional running expenses. For example, you cannot claim a deduction for lighting and heating a common room used by other members of your household.

Substantiation of the actual cost method us more labour intensive than the two other methods.

What are the requirements to substantiate costs?

Download the PDF to find out >>

 

For further information

If you have any questions or require further assistance related to individual tax solutions, please click here.

Authors

Ian MacPherson
Associate Director - Sydney
Jenae

Jenae Chessell

Manager - Tax Services

E: [email protected]