Working From Home Shortcut Method Extended…AGAIN!
- Government has extended the use of the ‘shortcut method’ again, in light of on-going COVID-19 lock downs
- Extended to 30 June 2021
- You must meet the record keeping requirements and working criteria to use each method
If you’re working from home, it’s handy to know that the Government recently extended the ‘shortcut method’ used to claim a deduction for your work-related expenses. The shortcut method initially applied from 1 March 2020 to 30 June 2020, however it can now be applied up until 30 June 2021.
Claiming a Deduction
To claim a deduction for working from home, all the following must apply:
- you must have spent the money
- the expense must be directly related to earning your income
- you must have a record to prove it.
This means you can’t claim a deduction for items provided by your employer, or if you have been reimbursed for the expense.
If you are not reimbursed by your employer, but receive an allowance from them to cover your expenses when you work from home, you:
- must include this allowance as income in your tax return
- can claim a deduction for the expenses you incur.
Expenses You Can Claim
If you work from home, you can claim a deduction for the additional expenses you incur. These include:
- electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- cleaning costs for a dedicated work area
- phone and internet expenses
- computer consumables (for example, printer paper and ink) and stationery
- home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the
- full cost of items up to $300
- decline in value (depreciation) for items over $300.
Expenses You Can’t Claim
If you are working from home, you can’t claim:
- the cost of coffee, tea, milk and other general household items your employer may have provided for you at work
- costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
- items that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone
- time spent not working, such as time spent home schooling your children or your lunch break.
Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.
There are three ways of calculating home office expenses depending on your circumstances. The methods are the:
- Shortcut method (80 cents) – only available 1 March to 30 September 2020
- Fixed rate method (52 cents)
- Actual cost method
It is important to note that you must meet the record keeping requirements and working criteria to use each method.
You can claim a deduction of 80 cents for each hour you worked from home for the period between:
- 1 March 2020 to 30 June 2020 in your 2019–20 tax return
- 1 July 2020 to 30 June 2021 in your 2020–21 tax return.
- were working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls
- incurred additional running expenses as a result of working from home.
The shortcut method doesn’t require you to have a dedicated work area, such as a private study.
Please note, you must keep records of your expenses in order to claim a deduction. You must keep a record of the hours you have worked from home. This could be a:
- similar document that shows the hours you worked.
The shortcut method covers all additional deductible running expenses, including:
- electricity for lighting, cooling or heating and running electronic items used for work (for example, your computer), and gas heating expenses
- the decline in value and repair of capital items, such as home office furniture and furnishings including capital items that cost less than $300
- cleaning expenses
- your phone costs, including the decline in value of the handset
- your internet costs
- computer consumables, such as printer ink and stationery
- the decline in value of a computer, laptop or similar device.
You don’t have to incur all these expenses to use the shortcut method, but you must have incurred additional running expenses in some of these categories when working from home.
If you use this method, you can’t claim any other expenses for working from home for that period.
When you are calculating the number of hours you worked from home, you need to exclude any time you took a break from working.
You can calculate your working from home deduction using the shortcut method, with this formula:
- total number of hours worked from home from 1 March 2020 to 30 June 2020 × 80 cents (for the 2019–20 income year)
- total number of hours worked from home from 1 July 2020 to 30 June 2021 × 80 cents (for the 2020–21 income year).
Semmens & Co can provide you with additional information as to how to calculate your working from home expenses prior to 1 March, or if you choose to use one of the existing home office expenses methods to calculate your deduction. If you use the other methods, you must also keep a record of the number of hours you worked from home along with records of your expenses.
Speak to Semmens & Co about the method that will give you the best outcome. Feel free to contact Semmens & Co on 03 8320 0320 for a free consultation.