If you’re still working from home (and will continue to do so), it might be a good idea to wrap your head around what exactly you can and can’t claim at tax time, as you might otherwise be in for a rude shock come July 1 when your assumed deductions are merely pipedreams.
An employee who is working from home (ie, you) may be able to claim deductions for expenses you incur that relate to your work. But this doesn’t mean a daily coffee delivered by Uber Eats or an oodie (despite it being your ‘work’ attire) can be claimed.
The Australian Taxation Office (ATO) has a guide on this for those of you who wfh, but we’ve condensed it here, starting with the working from home tax deductions you can claim.
Working from home tax deductions you can claim
ATO Assistant Commissioner Tim Loh told Gizmodo Australia that in order to claim a deduction for a work-related expense, you must meet the three golden rules:
- You must have spent the money yourself and weren’t reimbursed.
- The expenses must directly relate to earning your income and not be private in nature.
- You must have a record to prove it (a receipt is best).
Let’s break this down. First of all, in order to claim your working from home expenses at tax time 2022 (from July 1, btw), you must be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls.
Secondly, these expenses must be additional expenses incurred as a result of working from home. This means the usual expenses you had pre-working from home do not count as working from home tax deductions.
You can also claim a deduction for the additional running expenses you incur as a result of wfh – these include:
- electricity expenses for heating or cooling and lighting
- the decline in value of office furniture and furnishings as well other items used for work – for example, a laptop
- internet expenses
- phone expenses
- home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the full cost of items up to $300 or the decline in value (depreciation) for items over $300.
In limited circumstances, you may also be entitled to claim occupancy expenses as part of your tax deduction. It’s best to check with the Australian Taxation Office or your accountant for that one, however.
What you can’t claim
As we touched on above, you can’t claim a working from home tax deduction on coffees. This also extends to tea, milk and other general household items, even if your employer may provide these at work. Also, if your employer has provided you with a laptop or a phone, these aren’t yours to claim, neither is any expense you buy then your employer reimburses you.
If your employer pays you an allowance to cover expenses, you can claim a deduction for the expense. However, you must include the allowance as income in your tax return.
You also cannot claim costs that relate to your children’s education such as iPads and desks or subscriptions for online learning. As an employee working from home, generally you can’t claim occupancy expenses, either.
How to calculate your wfh tax deductions
You need to keep records for five years (in most cases) from the date you lodge your tax return. Records may include income statements, payment summaries and receipts. You will receive documents that are important for doing your tax during the income year.
Tracking your working from home expenses can be challenging, so the ATO introduced a temporary shortcut method. It’s a simple way to calculate these expenses with minimal record keeping requirements. The temporary shortcut method initially applied from 1 March to 30 June 2020, however it can now be applied up until 30 June 2022. The shortcut method is an all-inclusive rate of 80 cents per hour worked from home. Loh said that if you use this method you cannot separately claim any other costs associated with working from home, such as the decline in value of new furniture or a laptop, the work-related portion of your phone and internet costs or cleaning costs as these are included in the 80 cents.
There’s also the fixed rate method which is an amount per work hour for additional running expenses plus expenses not covered by the fixed rate. The 52 cents per hour fixed rate method requires a dedicated home office space. It covers the cost of heating, cooling, lighting and cleaning. You will need to separately calculate the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device and the decline in value of office furniture.
And the actual cost method, which is the actual expenses you incur as a result of working from home. Loh said it’s important to keep records for everything here.
“Regardless of the method that is used to claim work from home expenses, you must have records to prove it,” he said. “We strongly advise people to read the guidance on our website to ensure they understand their record keeping obligations.”
“It’s a fast, easy way to capture information on the go by taking and uploading photos of receipts,” Loh added.
Working from home expenses should be reported at the ‘other work-related expenses’ section in your tax return. If you are using the temporary shortcut method enter in the description ‘COVID-19 hourly rate’.
How to claim work-related phone calls on your tax return
You can claim a portion of your phone bill reflecting the share of work-related use of the line if you can show you are on call, or have to phone your staff, employer, customers or clients regularly while you are away from your workplace. If your employer provides you with a phone for work use and they are billed for the usage (phone calls, text messages and data), then you can’t claim a deduction. Similarly, if you pay for your usage and your employer then reimburses you, you can’t claim a deduction at tax time.
If you use your phone to seek employment you also can’t claim a deduction as you are not yet generating income from the use of the phone.
If your phone, data and internet use for work is incidental and you’re not claiming more than $50 in total, you do not need to keep records.
To claim a deduction of more than $50, you need to keep records to show your work-related use. Your records need to show a four-week representative period in each income year. You can then apply this representative period to the whole income year.
Records you keep may include diary entries, including electronic records and bills. Evidence that your employer expects you to work at home or make work-related calls from home will also help you show your entitlement to claim a deduction on your tax return.
Rules around claiming Laptops on tax
If you’re employed and required to work from home and have recently bought a laptop, you may be able to claim the value of your computer as a year-by-year depreciation deduction. In saying that, you must genuinely use the laptop for work. If you use the laptop for both work and private purposes, you can only claim a percentage based on the work-related portion of usage. If you paid for your computer, but your employer reimbursed you, you are not eligible to claim a deduction for it.
If your laptop was under $300, you can claim an immediate deduction for the full cost of the item. If the wfh laptop was over $300, at tax time you can claim the depreciation over the life of the equipment as a deduction on your return. For laptops, this is typically two years and for desktops, typically four years.
How to lodge your tax return
You can lodge online using myTax, through a registered tax agent or complete a paper tax return. Your tax return covers the income year from 1 July to 30 June. Tax time is July 1, 2022. If you need to complete a tax return you must lodge it or engage with a tax agent, by 31 October, 2022.