A significant number of Australian business owners and employees are working from home as a result of the covid-19 pandemic. A direct consequence of working from home is that additional expenses are accumulated by workers in relation to their income-producing activities.

These additional expenses include more money spent on lighting, heating, clean and cooling. Working from home also means that more money is spent on electricity used to operate electronic items. Phone bills increase, internet expenses surge and there is also a decline in the value of furniture and computers that are used for employment purposes.

To ease the burden on Australian taxpayers who are working from home the Australian government has extended the 80 cents per hour shortcut deduction method. This incentive originally introduced in April 2020 will now be in place until 30th June 2021.

Under this arrangement, taxpayers are allowed to claim a rate of 80 cents per hour for all their running expenses, as opposed to having to calculate costs for specific running expenses. The original requirement of having a dedicated work-from-home area is also removed. Under this scheme multiple people in a household are allowed to claim the 80 cents per hour rate.

Tax agents or self-lodgers must include the “Covid-hourly rate” in their annual tax returns if they choose to nominate to use this method. If choosing to use this shortcut method, all an individual has to do is keep a record of the hours they have worked from home as evidence when making a claim.

To be eligible to claim a deduction whilst working from home the ATO outlines that; “you must have spent the money, the expenses must be directly related to earning your income and you must have a record to prove it”.

Electricity expenses associated with heating, cooling and lighting the area of which you are working from within your home can be claimed under the scheme. Cleaning costs can also be claimed, as well as expenses for internet usage and phone calls. Newly bought home office equipment that is purchased for $300 or less can also be claimed. Office equipment consisting of new computers, phones, printers, furniture and furnishings. Computer consumables such as; ink, stationary and printer paper can also be claimed.

When you are working from home there are a number of expenses that cannot claimed. These expenses include; the cost of tea, coffee, milk and other household items which your employer might provide you with at work. Australians who are working from home are also unable to claim costs that relate to their children and their child’s education such as; setting them up for online learning, teaching them at home and buying equipment such as; an iPad to assist with teaching your child. You are also unable to claim items such as a laptop or phone that was given to you by your employer. Employees also can’t claim occupancy expenses such as; water expenses or mortgage interest rates.

Common mistakes people make when claiming work-from-home expenses

Forgetting to apportion shared bills – People often mistakenly claim their entire monthly bill even though the cost of that bill is shared with other household members. For example, if you live in a share house with two other people and you split the monthly internet bill of $120 equally, then your share is $40 per month. That is the amount you use to work out your claim, not the full $120.

Claiming home office expenses when you don’t have a dedicated room or office in your home – Although the ATO has relaxed this requirement for the “Shortcut Method”, to claim any home office expenses from prior to March 2020 you must have a dedicated room or office in your house. Your couch or kitchen table, doesn’t count.

Not understanding how depreciation rules work – If you purchase a work-related item such as a laptop that costs more than $300 you are unable to claim it in full on your next tax return. Instead, it is claimed over the ATO defined working life of the item. Items you purchase (computers, desks, printers etc) all have different “working lives” so it is important to check with your accountant about each one.