Making sense of WFH tax tweak

Chris Plakias
12:20pm April 16 2020

A woman browses at an Officeworks store in Melbourne. (Getty)

As a result of COVID-19 and the need to isolate at home, one of the largest adjustments has been the way we work. 

Putting to one side the variety of ergonomic and technological challenges that comes with adapting to a lengthy work from home experience, most of us have also confronted another issue: there’s a cost. 

A new desk, ergonomic chair, keyboard, monitor – it can add up. Quickly.   

And that’s before adding on higher household bills from equipment being plugged in all day. 

The good news is that the Australian Taxation Office (ATO) has come up with a novel (pardon the pun!) arrangement to help make it easier for people to claim home office deductions.   

In contrast to the old more complicated methods for working out what you can and can’t claim, employees working from home will now simply be allowed to claim 80 cents per hour worked to cover all their running expenses. For example, if you work 40 hours a week, you can claim a deduction of about $32 for that week.

Where multiple people are living together, they will each be able to claim this deduction.  

How? 

Simple. You just need to keep a record of the hours you’ve worked. 

One of the key benefits of this simple method is that you won’t have to apportion actual expenses between private and business use or have to separately identify between types of expenses, as is required under the usual methods. 

Here’s how it works (based on an example from the ATO):

Jane is an employee who starts working from home on 16 March as a result of COVID-19. To assist her with working from home, Jane has just bought a new monitor, desk, chair and stationery. She is also using her home internet to connect remotely. She is using her air-conditioning to keep her work area cool throughout the day and with the lights kept on to keep her workspace bright  her next power bill is likely to be much higher due to the fact she is now working exclusively from home. Under the new shortcut method, Jane can now claim to cover all her expenses at a rate of 80 cents per hour worked. All she needs is to keep a record of the number of hours that she has worked from home until 30 June. 

Alternatively, Jane could decide to use one of the existing methods to calculate her working from home deduction. Under that method, Jane must keep copies of the actual expenses she has paid. Jane would claim 52 cents per hour in relation to the desk, chair and electricity. She also needs to keep proper records to work out the difference between her private and business use to calculate the deduction for the monitor, stationery and internet.

You don’t have to use the new simple shortcut. It’s optional and can only be used in relation to the three-month period between March and the end of June 2020, meaning you still have to use the usual methods outside this period. 

Also, if using one of the usual methods provides a greater financial benefit, you can continue to claim a deduction based on apportioning the actual expenditure (including any depreciation of equipment).

In a very uncertain world, the tax office deserves credit for making tax time that little bit simpler. 

The views expressed are those of the author and do not necessarily reflect those of the Westpac Group.

The information in this article is general information only, it does not constitute any recommendation or advice; it has been prepared without taking into account your personal objectives, financial situation or needs and you should consider its appropriateness with regard to these factors before acting on it. Any taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. You should also consider obtaining personalised advice from a professional financial adviser before making any financial decisions in relation to the matters discussed.
 

Chris Plakias

Chris is Head of Indirect Taxes at Westpac Group. Having joined the group in 1999 he has been involved in providing tax advice to all parts of the business as well as dealing with tax policy and administration issues affecting the financial services industry. He is a member of the Australian Bankers’ Association GST working group and a member of the ATO's GST Stewardship Group.

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