Home Office Tax Deductions

June 14, 2020

This year our tax deductions will be quite different.

There are 3 ways to calculate your home office expenses.

  1. Shortcut method – 80 cents per hour from 1 March 2020 to 30 June 2020
  2. Fixed rate method – 52 cents per hour
  3. Actual cost method

You must include the note “COVID-hourly rate” in 2019–20 tax returns should you choose to use the new method.

Under the new arrangement, taxpayers will be allowed to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses. The requirement to have a dedicated work-from-home area will also be removed, with multiple people in each household allowed to claim the new rate.

The new method will cover the period starting 1 March 2020 until 30 June 2020, with the ATO open to extending the method depending on when work patterns start to return to normal.

The simplified method will cover all deductible running expenses, including electricity for lighting; cooling or heating and running electronic items, phone and internet costs; and the decline in value of a computer, laptop, home office furniture and furnishings.

Under the fixed-rate method, these running expenses were calculated at the rate of 52 cents per hour, with phone and internet expenses and decline in value on computers needed to be calculated separately.

The new method will be supplementary to the fixed-rate method and the actual cost method of calculating running expenses, with taxpayers able to choose the appropriate method for their circumstances.

Claims before 1 March 2020 must be under the two standard approaches.

For further information view the ATO website https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/home-office-expenses/

ATO example:

Jane is an employee who works as a Accountant.  Jane starts working from home on 16 March as a result of COVID-19 and replaces her face-to-face meetings with online video conferencing. 

Jane has just bought a new laptop, desk, chair and stationery. She also wants to claim some additional gas, electricity, phone and internet costs due to working from home.

Under the shortcut method, Jane can now claim all her expenses under a rate of 80 cents per hour. All she needs is her timesheets.

Jane can also decide to claim using existing working-from-home calculations. Under that method, she can claim the desk, chair, gas and electricity under the 52 cents per hour, but she would need to work out the decline in value of the laptop and calculate the work-related portion of the laptop, stationery, phone and internet.