The Australian Taxation Office (ATO) has set up a temporary ‘shortcut method’ to claim work from home deductions this year. Here’s how to use it to when you do your 2021 tax return.
The shortcut method was introduced last year in response to the rapid rise of people working from home.
ATO says shortcut method is the simplest way to claim
Assistant Commissioner Tim Loh said while many Australians have returned to workplaces over the past few months, many still continue to work remotely at least one or two days a week. To streamline their expense claims, Loh suggests using the shortcut method.
The working from home shortcut method allows claims at the all-inclusive rate of 80 cents per hour, rather than the need to calculate expenses for specific work items and requires little record keeping.
“The shortcut method is straight forward; just multiply the hours worked at home by 80 cents,” Mr Loh said. The only proof you need is a record of the number of hours you’ve worked from home, such as a timesheet.”
Other methods outlined here: Tips and tricks to maximise your tax return
How to claim using the shortcut method
The temporary shortcut method can be claimed by multiple people living under the same roof. Unlike existing methods, it also does not require a dedicated work area.
The shortcut is all-inclusive. You can’t claim the shortcut and then claim for individual expenses such as telephone and internet costs and the decline in value of new office furniture or a laptop.
Taxpayers can still claim under the existing arrangements if they choose.
“If you decide to go with an existing method, I would encourage you to do your research and keep good records. Tracking each individual expense and calculating the work-related part of each one is fiddly, so be organised. So, make sure you’ve read the guidance on our website or chat to your registered tax agent”, Loh said.
WATCH: Getting savvy about what you can claim on your tax return means you’ll receive back the full amount you’re entitled to:
Using the shortcut method…don’t claim these expenses
If you chose to claim your working from home expenses through the fixed rate or actual cost methods, remember you still can’t claim:
Personal expenses like coffee, tea and toilet paper. While they might normally be supplied by your employer, they still aren’t directly related to earning your income.
Expenses related to your child’s education. These include things like online learning courses or laptops
Large expenses up-front. Any asset that costs over $300 (either in total or per item), such as a computer, can’t be claimed immediately. Instead, these claims should be spread out over a number of years
Occupancy expenses. Employees generally can’t claim occupancy expenses such as rent, mortgage interest, property insurance, land taxes and rates. Working from home does not mean your home is a place of business for tax purposes. If you claim occupancy expenses, you may have to pay capital gains tax when you sell your home, even if it is your main residence.
Other ways to claim
You can choose one of three ways to calculate your additional running expenses for this tax time:
- claim a rate of 80 cents per work hour at home for all your working from home expenses;
- claim a rate of 52 cents per work hour at home for the heating, cooling, lighting and cleaning of your dedicated work area and the decline in value of office furniture and furnishings. Then calculate the work-related portion of your telephone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.
- claim the actual work-related portion of all your running expenses, which needs to be calculated on a reasonable basis.
Remember, to claim any work-related expense, you must have spent the money yourself and not have been reimbursed. The expense must also be directly related to earning income (not a private expense). You must also have kept any necessary records (a receipt is best).
This is an edited version of an article that originally appeared on Kochie’s Business Builders.