Tax deductions for working from home

Key takeway points
  • The ATO has introduced the shortcut method for calculating work from home expenses.
  • You can claim 80 cents per hour.
  • Applies from apply from 1 March 2020 to 30 June 2020 (maybe extended).
Working from home expenses

In the past, working from home may have felt like a fantasy for many people. But now, it is the norm for many parts of the workforce and will stay that way, in some form or another, for quite a while.

Now that the novelty of the new situation is wearing off, people are realising there are cost for this arrangement.  There were costs to set up their new home “office” (e.g. desk, chair, computer, monitor) and ongoing costs (e.g. electricity for equipment and air conditioning, phone and internet).

You have always been able to claim expenses for working from home, but the existing ATO methods were somewhat complicated and required proper record keeping of hours worked as well as records of all the expenses you wish to claim.  For a complete rundown of the approaches available, please visit this ATO page.

New Shortcut Method

Thankfully, the ATO has come up with a new approach to calculate your additional running expenses which is referred to as the shortcut method. This method allows you to claim a rate of 80 cents per hour for all additional running expenses. For example, if you work 20 hours at home in a week, you can claim a deduction of $18 for that week.

This shortcut method is a temporary measure which at this stage is only going to apply from 1 March 2020 to 30 June 2020.  The ATO may extend this period, depending on when work patterns return to normal.

Record keeping

If you use the shortcut method, you only need to keep a record of the hours you worked at home, for example via timesheets or diary notes.

The actual benefit

In terms of the actual dollar benefit, it will be a function of your marginal tax rate and the hours worked.  For a full-time worker (38 hours p.w.) over the four month period, they will be able to claim around $480 as a tax deduction.  If their marginal tax rate is 34.5% (incl. Medicare levy), their benefit will be around $165.  If they are in the next tax bracket, the benefit will be $190, and someone in the top tax bracket will receive around $225 benefit.

This article is the opinion of the writer and does not consider the circumstances of any individual. This document has been prepared by Peter Keogh (Authorised Representative No. 253538 of Paragem Pty Ltd AFSL 297276) and is intended to be a general overview of the subject matter. The document is not intended to be comprehensive and should not be relied upon as such. We have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained in this document. No responsibility is accepted by Peter Keogh, Paragem or its officers.



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