Homeworkers can claim new COVID tax deduction

Although some Australians have lost their jobs as a result of the coronavirus, for others the daily grind continues - but at home, where workers are expected to keep records of their expenses incurred.

Australians face higher mortgage costs with another rate hike all but certain

Australians face higher mortgage costs with another rate hike all but certain Source: Getty Images

It's expected millions who have left their offices will be able to claim the 80 cents per hour tax deduction for each hour of home work during the COVID-19 crisis -  but will they choose the old or new tax method?

Stephanie Barr works for herself in product strategy and has been based at her Melbourne home office on and off for four years.

But more recently, she's become one of the many Australians working at home full-time because of the global coronavirus pandemic.

"(I actually) Having worked at home previously, i do have a dedicated office room and now that I'm working from home full time, and my partner also occasionally needs to use a home office, it does make it a bit easier that we can both deduct a portion for the home office, potentially."

Now the tax office is giving home workers a shortcut to claim deductions at a flat 80 cents per hour rate.

The new shortcut method includes internet costs, cleaning bills, stationery, phone costs and other expenses.

ATO Assistant Commissioner Karen Foat says the shortcut approach can apply from March the 1st until the end of financial year [[JUNE 30]].

"We also just want it to be simple for people. So it's not really for us about the number of people working from home, it is a very unprecedented situation that the nation finds itself in so we're just trying to respond to that."

The Assistant Treasurer, Michael Sukkar, has called the tax rules a 'temporary arrangement'.

But Ms Foat hasn't ruled out an extension of the tax change into next financial year if the federal government continues to encourage everyone to work at home to curb the spread of COVID-19.

However not all expenses can be claimed.

"So you can't claim things like coffee, tea, even if your employer used to provide it when you were in the workplace, you can't claim for that and you also can't claim for the cost of your children's education. So some people think you can claim for the cost of setting up your kids to do online learning at home. You can't claim a tax deduction for those things because they are not related to earning your income."

The tax office states employees can't claim a deduction for items that their workplace has provided.

And staff cannot claim items for which they have already been reimbursed.

The 80 cents per hour rate applies to extra costs but it is also possible to claim under the previous fixed rate method of 52 cents an hour for heating, cooling, lighting and a decline in office furniture value.

Tax-payers can also choose to claim a work-related portion of all running expenses and calculate that amount on a reasonable basis.

CPA Australia is one of the largest accounting organisations and it wants this simpler shortcut to become a permanent option.

The general manager of external affairs Paul Drum says before March, workers based at home will still need to use the 52 cents an hour rate method.

"This is complicated and in some ways it is micro-managing the expenses so we think just being able to claim by number of hours working that you spent in your office working, 80 cents an hour is a good cut-through of some of those very old, cumbersome rules - although the old rules are not replaced. Certainly from 1 July last year right up until 1 March this year, you have to use the old rules anyway."

But he says many people are working from home for the first time therefore the new, simpler measures are appropriate.

"If you look at it from a dollar perspective, if someone is working 40 hours a week at 80 cents an hour, it's only 32 dollars a week or it'll be a claim of about $512 per person between now and the end of this financial year as a deduction, it's not a lot of money."

It's important for employees to keep a record of the hours they spend working at home as evidence.

Ms Barr says it appears the updated rules provide more flexibility but it could be tricky for people like her, who already worked from a home office.

"I guess for a lot of people who haven't been previously working from home it may be more straight-forward however if you have been working from home previously, I could see how that could get a bit confusing but again at the end of the day, it's more money in your pocket I guess so hopefully it all works out better for everyone in the long run."

Applicants can lodge their own tax returns online from July the 1st but if using the new approach, they must note 'COVID-hourly rate.'

5 min read
Published 19 April 2020 at 3:38pm
By Stephanie Corsetti
Presented by Shah Paung