Claiming tax deductions when working from home during COVID-19

Vania Wang • October 7, 2020

Claiming tax deductions when working from home during COVID-19

COVID-19 has changed the day we work. If you have been working from home, you might incur expenses you could claim a deduction for when filing your tax returns.

To claim expenses for working from home, you must meet the following conditions:

• You must have actually spent the money

• The expense should be the result of your work

• You should have a record to prove it

This means that you cannot claim a deduction for items your employer has provided or if you have received reimbursement for an expense.

If your employer hasn’t reimbursed the sum but pays an allowance to cover your expenses when you are working from you, you:

• Should include this allowance in your tax filing

• Could claim a deduction for the expenses you’ve incurred

Expenses you can claim

You can claim a deduction for any additional expense that you’ve incurred, including:

• Phone and internet bills. If you use the phone/internet for work, you could claim a deduction for the work-related portion of the expenses if you paid these bills and have documents to support your claim. You must keep records of a 4-week representative period in every income year to claim a deduction of $50 or more. These records include bills, diary entries and any other evidence that demonstrates you worked from home and that you made work-related phone calls.

• Electricity expenses for cooling, heating and lighting the space you are working from and running items you’re using for work.

• Computer consumables such as cartridge and printer paper and stationery.

• Cleaning costs for a dedicated workspace.

• Home office equipment such as phones, computers, furniture, printers and furnishings. You can claim either the full cost of equipment up to $300 or depreciation for items worth over $300.

• Cost of repairs to such equipment, furnishings and furniture.

Expenses you can’t claim

When working from home, you cannot claim the following expenses:

• The cost of milk, tea, coffee and other general household items that your employer may otherwise have provided at work.

• Costs related to children as well as their education, including setting them up for online classes, teaching them at home or buying equipment like desks and iPads.

• Time spent not working, like time spent homeschooling the children or your lunch breaks.

• Items you’ve claimed reimbursement for.

In general, employees cannot claim occupancy expenses like mortgage interest, rent, water and rates.

Calculating your expenses

For the financial year 2019-20, you can calculate home office expenses in one of three ways, depending on your situation. These methods are:

• Shortcut method – Tracking expenses incurred for working from home can be a challenge, so the Australian Taxation Office has brought in the shortcut method, which can be applied for expenses incurred up to 30 September 2020.

Here’s the formula to calculate your deduction under this method:

Number of hours worked from home x 80 cents

• Fixed rate method – Using the fixed rate method, you can make a claim of 52 cents for every hour you work from home.

• Actual cost method – Using the actual expenses method, you can claim the costs you actually occurred as a result of working from home.

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