Not all work-related expenses are created equal such that we think we can claim anything or everything as a tax deduction. This is a no no! The proliferation of “Work from home” (WFH) related expenses during this ongoing pandemic is now more than ever, attracting ATO’s intense scrutiny.
The key thing to remember is that the WFH expense should satisfy the nexus or the ”link” between the expense and your taxable income, i.e., your work or business, the percentage of how much of that expense could be pinpointed to your taxable income, and that you have the ever-important record-keeping proving your claim.
|ATO’s three (3) methods of claiming WFH Expenses.|
(Choose one that will give you the best outcome as long as you meet the working criteria and record keeping requirements for each method).
|1. The 80 cents ($.80) per hour short-cut method (only available from 1 Mar 2020 to 30 Jun 2021)||Have a ready Excel sheet as an evidence of hours worked, a roster, a timesheet, or a diary. This method covers all your working from home expenses such as;|
> phone expenses
> internet expenses
> the decline in value of equipment and furniture
> electricity and gas for heating, cooling and lighting
Please note: If you use this method, you can not claim any other expenses for working from home.
|2. The 52 cents ($.50) per hour method||Have a ready Excel Sheet as an evidence of hours worked, or a timesheet or a diary)|
|Add the following to your claim (but ensure they are substantiated with tax invoices and/or calculations).|
|> Work % of using your mobile phone call|
|> Work % of using your home internet|
|> Work % of using electricity bill (heating, cooling and lighting)|
|> Work% of computer consumables and stationery (such as ink).|
|> Work % of the decline in value of laptop, desktop, printer, etc. (Show how you calculated work work-related use of the asset). The below link from ATO is a good reference.|
|> Work% of the cost of repairs to your home office equipment, furniture and furnishings.|
|3. The actual expenses method||You will have to work out your deduction for the actual cost incurred. A record of your expenses is a must and the calculation of work-related portion.|
|Avoid these common errors|
(ATO already knows these tricks!)
|1. Personal expenses||Coffee, tea, toilet paper (yes, not the toilet paper – we can buy as many toilet paper as we want, but we can only use them and not deduct them!)|
|2. Child’s education expenses||Online learning courses of your children, or their laptops.|
|3. Claiming large expenses upfront||Instead of claiming depreciation for assets.|
|4. Occupancy expenses||Rent, mortgage interest, property insurance, land taxes and rates. These generally cannot be claimed by employees working from home.|
Remember, these work-related expenses only apply if you work from home and spent money on work-related items that were not reimbursed by your employer or your business, but we need to have the evidence that the expenses satisfy the nexus between the allowable expense and your taxable income.
If you would like to have a chat about this subject further, contact us on 07 3483 0100.