Because of COVID-19 there are now more people than ever working from home. Whether you’re new to working from home or always have, the same tax deduction rules apply.
Let’s cover some basics - to claim a deduction for work-related expenses, you must have spent the money yourself, the expense must directly relate to earning your income and you must have a record to prove it (usually a receipt). Remember, you can’t claim deductions for items provided by your employer, or if you’re reimbursed for the expense.
If you receive an allowance from your employer to cover your work from home expenses you can:
include this allowance as income in your tax return
claim a tax deduction for the expenses you incur.
Methods to calculate working from home deductions
There are three different methods you can use to calculate working from home expenses.
1. Temporary shortcut method - You can claim an all-inclusive 80 cents per hour for each hour you work from home. This method is temporary and can only be used to calculate your working-from-home deduction between:
1 March to 30 June 2020 in your 2019–20 tax return
1 July 2020 to 30 June 2021 in your 2020–21 tax return.
If you use this method, you can't claim any other expenses for working from home for that period.
2. Fixed rate method - If you have a dedicated work area (like an office), you can claim a fixed rate of 52 cents for each hour you work from home. This rate covers the cost of:
electricity and gas for heating, cooling and lighting
the decline in value of your home office equipment, furniture and furnishings – for example, a desk
the cost of repairs to your home office equipment, furniture and furnishings.
You will need to separately calculate your work-related use of:
computer consumables and stationery (such as ink)
decline in value of equipment (such as phones, computers and laptops).
3. Actual costs method - You can claim the actual work-related portion of the additional running expenses you incur when working from home, which you need to calculate on a reasonable basis.
What records do I need to keep?
If you use the temporary shortcut method, you need to keep a record of the hours you worked at home. This could be a timesheet, roster, diary or similar document that shows the hours you worked.
If you use the other methods, in addition to keeping a record of the number of hours you worked from home you must also keep records of your expenses. For more information on what those records are see home office expenses.
Can I claim a deduction if I bought new office equipment like a laptop or desk?
Keep in mind that if the item is used for both work and private purposes, you can only claim a deduction for the work-related portion.
I've been working from home due to COVID-19. If I travel into my workplace, can I claim travel costs?
Generally, people can’t claim a deduction for the cost of travelling from home to work, as it is considered a private expense. Your home doesn’t become your base of employment/operations simply because you are working from home due to COVID-19.
I made changes to my house to create a home office during COVID-19. Are these costs deductible?
No. As an employee you can’t claim a tax deduction if you extend or renovate your home to build a new home office.
I have been directed to temporarily work from home. Can I claim occupancy costs like mortgage interest or rent?
No. If you’re temporarily working from home due to COVID-19, you can’t claim a deduction for occupancy expenses such as rent, mortgage interest, property insurance or land taxes.
The costs incurred in maintaining your home are generally domestic in nature and are considered a private expense. This is true even if you can’t use or access the work location that your employer usually provides.
Can the temporary shortcut method be used by multiple people working in the same house?
Yes, multiple people living in the same house can individually claim the 80 cents per work hour deduction.