What Tax Deductions Can I Claim When I Am Working From Home

/in , , /by

Working from home has become the new normal. The major advantage that it offers is the greater level of flexibility. However, there is one thing that has no flexibility: no matter where we work from, our tax obligations still remain the same. Did you know that you may be eligible for a depreciation tax benefit for your incurred costs during the COVID situation as well? Yes, you read it right! You can claim certain costs related to work from home obligations. However, it must be noted that this only concerns the people who usually work from an office but due to the COVID pandemic, or any other reason outside their control, are currently working from home. You should also remember that you cannot claim the amount reimbursed in this case.

Methods for Calculating Your Tax Deduction While Working From Home

Taxpayers were generally using two different methods before 1 March 2020 for calculating home office tax deduction, the Fixed Rate Method and Actual Cost Method. And these are still applicable.

But as a result of the COVID-19 pandemic, the Australian Taxation Office (ATO) introduced of the Shortcut Method, which applies to the periods:

  • 1 March 2020 to 30 June 2020 for the income year 2019–20; and
  • 1 July 2020 to 30 September 2020 for the income year 2020–21

According to the ATO, extension in the period is possible. However, this depends on the length of time the pandemic disrupts normal operations.

The ATO depreciation rate under the Shortcut Method is 80 cents per hour. This is for all “running expenses”. While using this method, you must record the corresponding working hours at home.

Methods for Calculating Your Tax Deduction While Working From Home

You should fully do the office work from home and not just the minimal task. The below are items that can be claimed in part as work from home expenses as listed below:

  • Occupancy expenses like mortgage interest, rent, and other costs.
  • Heating, cooling, and lighting – this includes various household utility bills.
  • Home office equipment- this includes computers, telephones, and printers.
  • Work-related phone calls – this includes phone rentals or mobile usage for office work purposes.
  • Internet usage
  • Depreciation in the value of furniture and fittings – you can claim for furniture such as desks and cupboards which are used for home office.
  • Depreciation of office equipment and computers

It is always advisable to consult an expert for all the tax-related matters concerning the common tax issues and especially about the tax depreciation schedule for rental property.

Is There a Need to Follow Any Tax Depreciation Schedule While Working From Home?

With the short cut method, it is not required. In other cases, an accountant can help in calculating the depreciation value. But if you are running a business from home, an expert can guide you in preparing the federal tax depreciation schedule.

What Are the Capital Gains Tax Implications When You Work From Home?

If you are working from home, you do not have any capital gains tax (CGT) implications for your home. This applies when you run a business from home.

Conclusion

Today more people are working from home however, facing certain expenses that weren’t in the picture during the regular times. You can follow the above procedures for achieving the depreciation tax benefits. Understanding tax claims is a challenging process but, the shortcut method gives you a simple calculating option. All you need to do is maintain the record of your working hours and expenses. If in any doubt, contact a tax expert for advice.