As a result of the Coronavirus (COVID-19) outbreak, many Australians have been thrust into working from home. Whilst the ATO has already responded by lifting the flat rate from 52 cents to 80 cents per hour for operating expenses, whether any further changes are likely to be forthcoming is an open question, but we think it is one that requires active consideration.
With your home now technically being your workplace, below we outline some of the key rules for claiming deductions associated with working from home.
When working through what is deductible, it is important to distinguish between two different categories of expenses:
- Operating expenses (running costs), and
- Occupancy expenses (home office expenses).
1. Operating Expenses
The work related portion of the following operating expenses may be legitimately claimed:
- Depreciation of home office furniture, fittings and equipment such as computers and desks;
If the amount is less than $300, an immediate deduction for the work-related portion can be claimed. Otherwise it must be written off over the effective life of the asset.
- The cost of repairing home office furniture and fittings;
- The cost of your air conditioning (heating / cooling), electricity and cleaning your home to the extent that the cost exceeds the amount normally spent if not working from home;
- Phone calls and mobile phone usage;
Mobile phone usage is subject to some administrative short-cuts with a standard $50 fixed deduction per year being allowed. Otherwise, an apportioned deduction based on actual expenses is required, which can be quite rigorous, requiring a diary to be kept for a representative 4-week period.
- Internet access charges;
- Printer and printer cartridges.
In respect of depreciation of home office furniture and costs in air conditioning (cooling, heating) lightning, the ATO applies some useful administrative rules so as to allow either a reasonable portion based on a reasonable test of the actual expenses incurred or a flat rate of 80 cents per hour (previously 52 cents per hour). This flat rate includes heating, cooling, lighting, cleaning and the decline in value of furniture, so if using the flat rate, you can’t also claim depreciation on office furniture although it can still be separately claimed for office equipment.
If applying the former, the receipts will be needed together with a detailed explanation of the basis of apportionment such as floor space used for work purposes relative to total work space in the house. If the latter, a record can be kept of hours worked from home or a diary should be maintained for at least 4 representative weeks to record the amount of time the home is used for work purposes.
Example: If as a result of the Coronavirus, 20 hours of a working week is conducted at home for 12 weeks in the year to 30 June 2020, $192 can be claimed as a deduction (20 hours x 12 weeks x $0.80).
2. Occupancy Expenses
In general, occupancy expenses cannot be claimed by employees. This includes expenses such as:
- Interest on mortgages,
- Council rates, and
- Land tax.
All such items relate to costs associated with occupying the premises as a whole - as opposed to running costs associated specifically with working from home. The only genuine qualification to this exclusion arises if there is a dedicated area which is dedicated as a workplace.
*If a claim is made for occupancy expenses, the capital gains tax (CGT) main residence exemption will be compromised. It is not so compromised if only operational (running) expenses are claimed.
Other equipment and services needed to work from home
Many Australian employees are working from home for the first time. To facilitate this, equipment and services such as laptops or other mobile devices, headsets, web cameras, cloud-based platforms for video and audio conferencing and webinars have been purchased in the last few weeks.
*If the employer has paid for any of these items outright or reimbursed the employee for any such expenses incurred, the employee cannot claim any amount and the employer is entitled to the deduction for the expense or the decline in value of the depreciating asset. If the employee has borne the cost without being reimbursed by their employer, they are entitled to claim a deduction to the extent of taxable use, but they must adjust their claim for any private use.
Whilst we detail what we know so far, as more information becomes available on this matter, we will continue to keep you updated.
Our Centres of Excellence
To manage the ongoing technical issues for all of our clients including the JobKeeper eligibility and payment plus other Stimulus measures and the Fair Work changes Azure Group have established the following two centres of excellence:
- COVID-19 Stimulus Centre of Excellence; and
- Fair Work Centre of Excellence.
Each of the above centres of excellence has a dedicated team of technical specialists. If you have any specific questions about these measures please contact our centres of excellence via email: firstname.lastname@example.org
Extension of JobKeeper and Loan Scheme, published July 23, 2020
You can still Raise Capital in 2020, published July 08, 2020
Did you apply for the NSW $3,000 Small Business Recovery Grant, published July 07, 2020
Things to consider when withdrawing Super before and after June 30, published June 26, 2020
Consider your timing when paying Bonuses to Employees, published June 25, 2020
How will COVID-19 affect your End of Financial Year Tax return?, published June 15, 2020
Is your business Tax ready for EOFY?, published June 11, 2020
COVID-19: 5 Steps Plan to surviving the next 6 month as a business, published June 02, 2020
COVID-19: How to motivate your team while working remotely?, published May 18, 2020
Expanding globally during COVID-19: Risky business or perfect timing?, published May 07, 2020
Cashflow is a lifeblood of your Business, especially now during a pandemic such as Coronavirus, published April 22, 2020
Finding opportunities in a crisis and how to recover on the other side of COVID-19?, published April 20, 2020
COVID-19: What does 'Standing Down my team' mean to my Business?, published April 16, 2020
JobKeeper Payment: Eligibility Rules have been released! Who is Eligible?, published April 15, 2020
COVID-19: EMDG extra funding of $49.8 million to help Exporters, published April 7, 2020
Startups and Scaleups: R&D Tax Incentive FY2019 deadline extended due to Coronavirus, published April 6, 2020
What is the difference between JobSeeker and JobKeeper? Do you know what you're eligible for?, published April 2, 2020
JobKeeper Allowance: New Government financial measure as a response to COVID-19, published Mar 31, 2020
Should you do Business Planning during CoVID-19?, published 27 Mar, 2020
A second CoVID-19 Stimulus for Businesses, published Mar 24, 2020
Financial relief for business experiencing difficulty due to CoVID-19 and State Government Support, published Mar 21, 2020
What are the benefits of Coronavirus Stimulus Package for businesses?, published Mar 13, 2020
Have you noticed our #FridayExpertTips... here's one that relates to #StimulusPackage
"Anyone impacted by CoVID-19: ATO Relief is NOT AVAILABLE AUTOMATICALLY. You will need to apply for relief. Contact ATO Emergency Support Infoline 1800 806 218 or get in touch with us."
This information is accurate on the day it’s published and is subject to change as the situation around Coronavirus (COVID-19) evolves. Our conclusions may not be valid if there is any change in those facts, circumstances and assumptions. Accordingly, neither Azure Group Pty Ltd nor any member or employee of Azure Group, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused.