Tax Perks of Working from Home
A good chunk of the Australian population is now working from home. And while we’ve all been adjusting to our new workdays, the ATO has been busy devising a plan that’ll make it a little easier for us all to claim our expenses, come tax time.
The new ‘short cut’ method.
The ATO appreciates many of us are working from home for the first time, so managing our time with children and workload may not be easy. Throwing into the mix doing timesheets and keeping detailed records of our work hours and expenses may just throw things out of whack. So, they’ve introduced a new model for simplicity.
Under this new model, you can now claim a rate of 80 cents an hour for all running expenses. And you don’t need a dedicated workspace to claim this rate. It’s applicable to every individual working from home – you’re all entitled to your 80 cents/hour. It’s not divided.
This new system has been designed to cover the use of things like home internet, phone calls and running costs. Of course, if you’re planning on buying a new printer, scanner or any other work-related items, you may not be better off. It may be worth doing the math if you’ve got time to do it.
If you’re looking to claim new purchases, just remember the three golden rules for claiming – you need to have spent the money yourself (and you’re not going to be reimbursed); the claim must relate to earning an income, and there must be a record to substantiate the claim.
The standard fixed-rate scheme.
If you’ve ever made claims for your home office, you’d be familiar with the 52 cents in every dollar for each hour working from home. Of course, this requires a little (a lot) more record keeping. You’ll need to keep a 4-week diary of your usual patterns of working from home, which will then be applied to the rest of the year.
Under this scheme, you can claim all kinds of things including:
- Home office equipment: computers, printers, telephones and furniture and furnishings. You can claim the full cost for items up to $300 or depreciation for items more than $300 in value.
- Utility bills, including heating, cooling and lighting.
- The costs of repairs to home office equipment, furniture and furnishings.
- Cleaning costs for your work area in your home.
- Other running expenses including computer consumables, such as printer paper, ink and stationery.
Claiming actual expenses
If you really like to keep track of your records, you can consider claiming actual expenses. You can record specifically the amount of time spent working using your many purchases listed above. But again, you must be really meticulous with your record-keeping – very few people are willing to do this.
Can I claim my mortgage or rent?
In short, probably not. If you’re part of the new work from home crew (working a full-time job), you’re not allowed to claim mortgage interest, rent, rates, land tax, body corporate or any of those good things you can normally claim with an investment property.
The main exception is that if you are legitimately running a small business from your home – where a room is dedicated as a place of business. You might be a freelancer or a hairdresser working from home and in that case, you may be able to make a claim. But it will only be a percentage, not the full rent or full amount of interest on your mortgage.
How about if I run a ‘side hustle’ from home? This can be really hard to prove that you’re running a small business – that it’s not just a hobby. If you have a full-time job, you might expect the ATO to be a little more aggressive on these claims. So be careful when you’re making claims. Of course, the advantage of not making these claims is you won’t have to pay capital gains tax when you sell.
So what should I do?
You have the facts now, it just depends on your drive and expenses now. If you have the time to keep records for a month, try it. But if your time is better-spent home-schooling or even Netflixing, that’s okay too! Unless you’re making huge purchases, the difference in money lost may be marginal. You may want to use this time to brush up on your property investment knowledge and make even more beans in the long run!