WFH expenses increasing your household overhead costs?
For home-office deductions in Australia, the ATO offers three methods—Shortcut, Fixed Rate, and Actual Cost—each catering to different levels of expense and record-keeping requirements.
Additional Expenses
The shift to working from home due to the pandemic has led to additional expenses, which can be claimed as deductions according to ATO guidelines.
3 ways to Calculate
The ATO provides three methods for calculating home office deductions: Shortcut Method (80 cents per hour), Fixed Rate Method (52 cents per hour), and Actual Cost Method, each with specific coverage and criteria.
Track with an App
To maximize deductions, taxpayers should maintain detailed records of their expenses and consider using the myDeductions app for accurate tracking
Self-quarantine and home isolation brought about by the pandemic has caused almost 54% of organisations and self-employed individuals to work from home in Australia. While workers have enjoyed the advantages of temporary home-based employment, it is seen as a factor with considerable cost from running additional expenses.
Australian Taxation Office has defined home office deductions that can be incurred by employees including electricity, phone, internet expenses and decline value of furniture or equipment. However, individuals who operate in home as a principal place of business must refer to running your business from home.
While offering convenience, work-from-home set ups incur expenses in electricity, internet connection, or mobile usage.
Taxpayers are highly encouraged to keep expenses and income records using myDeductions.
Three methods are outlined by the ATO for calculating home office deductions:
Shortcut Method
80 cents per hour can be claimed for every hour an employee worked from home between the period of 1 March to 30 June 2020.
When to choose this rate:
- if an employee fully worked from home, excluding minimal tasks such as taking calls or checking updates
- if an employee incurred extra operating costs due to working from home
What covers this method?
- phone expenses
- internet expenses
- declining value of equipment and furniture
- gas and electricity
Fixed Rate Method
52 cents deduction for every hour an employee worked from home
How to choose this method?
Records of the actual hours an employee worked from home during the income year must be kept, or a diary for a representative 4-week period to show working patterns from home. A dedicated work area such as home office is a requirement to be eligible.
What covers this method?
Employees must separately calculate the following: phone expenses, internet expenses, computer consumables, and value depreciation
Actual Cost Method
Usually gives rise to a greater deduction and allows taxpayers to claim extra running costs they directly incur due to working from home. These include:
- electricity and gas (for cooling, heating, and lighting)
- phone and internet expenses
- cleaning
- computer consumables
- decline in value of home office furniture
- decline in value of phones, computers, and other similar devices
