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Claiming home office running costs

In response to the vast number of people working from home for the first time, the Australian Taxation Office (ATO) has announced a temporary, simplified method for calculating a deduction for home office running costs.  Between 1 March 2020 and 30 June 2020, a deduction of 80 cents per hour can be claimed on all running expenses for work duties carried out from home. 

The simplified method is available to all taxpayers who are currently working from home, not just those affected by COVID-19.  Multiple people living in the same house can claim the new rate individually, as this shortcut removes the requirement for a dedicated work from home area.

This is a temporary method being offered as an alternative to existing arrangements for claiming working from home running costs, and only applies for the period between 1 March 2020 and 30 June 2020.  However, if circumstances influenced by COVID-19 do not change by 30 June 2020, the simplified method may be extended further.

How do I claim running expenses using the temporary, simplified method?

The 80 cent per hour shortcut method is designed to cover all deductible running expenses incurred by employees and business owners while working from home between 1 March 2020 and 30 June 2020.  Eligible expenses include:

  • Electricity and gas expenses associated with working, such as heating, cooling, lighting and powering computer usage for work activities;
  • Cleaning costs for dedicated work areas;
  • Phone and internet costs relating to work activities;
  • Computer consumables and stationery; and
  • Depreciation of home office furniture, furnishings and equipment.

The deduction is calculated by multiplying the number of hours a taxpayer worked in the period 1 March 2020 to 30 June 2020 by $0.80 per hour.  For example, a taxpayer who has worked 456 hours during the eligible period can claim a deduction of $364.80 in their 2019-20 tax return. 

456 hours x $0.80 per hour = $364.80

Taxpayers intending to claim working from home expenses using the simplified method must keep a record of hours spent working from home as evidence to support their claim.  This documentation can be in the form of timesheets, a diary, rosters or similar documentation which outlines hours worked.

When lodging their 2019-20 income tax return, taxpayers must include the notation “COVID-19 hourly rate” next to the deduction for home office expenses.

What expenses cannot be claimed using the simplified method?

There are some exceptions to claiming deductions using the simplified method:

  • Any employees that are on leave, or that have been stood down, will not be able to claim a deduction during this period;
  • Business owners will not be able to claim a deduction if they have ceased trading permanently;
  • Occupancy expenses relating to your home, such as rent, mortgage interest, property insurance and land taxes are not included in this method; and
  • Any working from home expenses that were incurred before 1 March 2020 cannot be claimed under the simplified method.

What are the arrangements for claiming working from home expenses prior to 1 March 2020?

There are two existing methods for claiming a deduction for working from home running expenses, such as lighting, heating and cooling, cleaning and the decline in value of office furniture, furnishing and equipment: 

  • 52 cent fixed rate method (fixed rate); and
  • actual expenses.

Fixed rate method

To claim a deduction for home running expenses using the fixed rate method, taxpayers must keep records of actual hours worked at home during the income year, or a diary for a representative 4-week period to demonstrate a usual pattern of working from home.  The representative amount can then be applied across the remainder of the year to calculate the full claim amount.

For example, a taxpayer who maintains a weekly timesheet calculates the total hours spent working from home during the income year (832 hours), and multiplies this by $0.52 to calculate a total deduction of $432.64:

832 hours x $0.52 per hour = $432.64

Another taxpayer keeps a diary for a representative four-week period, recording the hours worked from home.  At the end of the four-week period, the taxpayer has recorded working 24 hours from home.  The taxpayer calculates his deduction for the income year to be $162.24. 

24 hours / 4 weeks = 6 hours per week

6 hours x 52 weeks = 312 hours

312 hours x $0.52 per hour = $162.24

It is important to note that the fixed rate method does not cover phone and internet expenses, or computer consumables and stationery.  Contact your accountant for more information about claiming these expenses, or visit the ATO website

Actual expenses

Taxpayers choosing to use the actual expenses method will need to keep detailed records and written evidence to determine the work-related proportion of actual expenses incurred from working at home.  Whilst in some cases this method may result in a larger deduction, it necessitates much more time to calculate, and the evidentiary requirements are far greater.  Contact your accountant to find out more information about claiming actual expenses, or visit the ATO website.

What activities are not considered to be working from home?

Occasionally checking work emails or taking work calls while at home does not qualify as ‘working from home’.  Any work conducted must be substantive and directly related to the taxpayer’s own income-producing activities.  Similarly, employees taking leave who occasionally ‘check in’ with work (such as reading work-related emails) to keep up to date do not qualify as working from home.

Are there CGT implications of working from home?

Generally, employees working from home will not have Capital Gains Tax (CGT) implications for the home.  However, running a business from home or claiming occupancy expenses may result in CGT being applied.  By claiming occupancy expenses, a home will not be eligible for the full main residence CGT exemption, however may still be entitled to a partial exemption.  Capital Gains Tax is a complex matter, and we recommend that you seek advice from your accountant before claiming any expenses that may have CGT implications.

We can help

To understand which method of calculating a working from home deduction is right for your circumstances, contact your accountant today.