Now that many Australians are working from home due to COVID, they tend to have more expenses to claim on their 2020 tax returns. If you are one of these employees, there is extra information we need so that we can claim a tax deduction on certain work-related expenses, such as home internet, mobile phone, stationery, computer costs, etc.
Home Office Expenses
There are different ways of calculating how much you may claim out of your Home Office Expenses.
Note that you can’t claim for home office if it’s merely convenient to work from home, but really you do most of your work at your employer’s workplace.
Fixed Rate/Actual Method:
Under this method, you can claim 52 cents for every hour you spent working from home for electricity. This does not include claims for other expenses like the Internet, phone, stationery, journals etc which are claimed separately.
To claim internet/phone you need to keep a 30 day diary, to prove your usage. The ATO wants a 30-Day Diary pre-COVID (if applicable) and during COVID for this usage. You also need a separate office/working area for the $0.52 rate where no-one else is accessing the internet at that time (not at all easy to calculate, if you, your partner and your children are all using internet at the same time).
COVID ShortCut Method:
This method applies from 1 March to 30 September 2020, so we are going to have the same COVID calculation issues in 2021. Under this method, you can claim 80 cents for every hour you work from home. The expenses incurred from your phone, internet, electricity, gas & depreciation are already included, thus you can no longer claim any other expenses for working from home. The advantage with this method is it’s easier to justify – you don’t need a completely separate office, and it doesn’t matter if others are using internet at the same time as you.
Remember:
- Work-Related Stationery, Couriers, Postage, New Laptop, etc: Make sure you keep your receipts & tax invoices, and store them safely as you will need to keep them for at least 5 years. For expenses over $300, we need copies of the invoice, in case the item needs to be depreciated over a number of years.
- Note that for both methods – the Actual Method v COVID Shortcut – you have to have a record/diary showing the number of hours you spent working from home. Ban Tacs has a 30-Day Diary you can use, or make up your own spreadsheet. It doesn’t matter to us what format you use, as long as it’s easy for us to understand and calculate.
Motor Vehicle Expenses
Logbook Method: To claim motor vehicle expenses under this method, you need a logbook, kept for 13 weeks. As it can be a nuisance to write in a paper logbook, you can record your car trips automatically, using an ATO approved app like DriversNote, which some of our clients use, as it prints out some very good reports.
Cents per Km Method (5000km maximum): This can be calculated on a reasonable basis. For example, if every Thursday afternoon you visit a supplier, or client, and it’s 100km round trip, then a reasonable basis might be 48 weeks x 100km x $0.72. We don’t need to see how you calculated this. However, don’t claim the full 5000 km unless you can justify it, as the ATO is watching work-related expenses this year particularly carefully, due to COVID adjustments for people who were working from home for around 3-4 months of the year instead of their usual laundry or motor vehicle claim.
Our 2020 checklist has been amended in 2020, to make the Working From Home information we need, easier to calculate your best claim for tax purposes. If you haven’t prepared your 2020 tax paperwork yet, click here to grab the very latest copy.