Your COVID 19 tax return: optimise your home-office refund
Published 12:19 am 1 Jul 2020
With corporate offices closed due to coronavirus, millions of extra Australians have begun working from home. Don’t miss out when it comes to claiming the cost of this added burden at tax time. DGI Founder and CEO Dominique Grubisa explains the key deductions to watch out for this year.
Has your home dining table turned into your fulltime work desk during the coronavirus lockdown? You’re not alone. Figures from research organisation Gartner HR suggest a whopping 88 percent of organisations in the country have required or encouraged staff to work from home during COVID 19, in one of the biggest work-culture shifts in history.
There are pros and cons to working from home, but one of the biggest disadvantages is that workers are being slugged countless millions for things like power, equipment and heating – all of which would normally be covered by their employers. The ATO has recognised the situation and has introduced new options for claiming home office expenses. But, with each individual’s circumstances varying widely, choosing the wrong option could cost you hundreds of dollars in lost rebates – or more.
To avoid missing out, follow these tips for a more tax-effective return this year.
Home office costs
As many Australians have never worked from home before, the ATO has introduced a simple method to allow them to claim home office expenses incurred during the corona period. The so-called ‘Shortcut Method’ involves claiming 80 cents per hour for the time you have spent working from home from March 1 until June 30. This covers your expenses for:
- Equipment depreciation
For a typical full-time worker, it works out to a deduction of about $500. To claim, you need to keep evidence that you worked from home during this period. Multiple people in the same house may claim the deduction.
The problem with the shortcut method is that it sells short people who might have recently invested in expensive office equipment or have particularly high phone or internet costs. If you fall into this group, you should speak to your accountant about potentially using the ‘Fixed Rate’ or ‘Actual Cost’ methods for calculating expenses. The extra effort required could save you hundreds or thousands of dollars.
No matter what method you chose, you cannot claim coffee, tea or toilet paper purchased for the home as a home office expense. And remember that using your home as a place of business is likely to affect your eventual capital gains liability if you own your residence.
Hand sanitiser and other deductions
As in any other year, employees are able to claim for work expenses related to motor vehicles, travel and clothing. Sadly, the ATO has indicated that the cost of travelling from your home office to your formal office for meetings is not deductable, even during COVID. However, a new potential deduction relates to hand sanitiser and face masks. The ATO has said that if your job requires you to come in close contact with the public (through work in sectors like healthcare, retail and hospitality), you can claim the cost of protective equipment not provided by your employer.
With many people under-employed due to the economic slowdown, there’s strong anecdotal evidence that they are using the time to learn new skills. If you have undertaken online training recently, you may be able to claim a deduction. To qualify, the training you have undertaken must have resulted in a formal qualification and must have been related to maintaining or improving work skills that are likely to increase your income.
Don’t forget the tax offsets introduced by the Morrison Government in late 2019, before we had even heard of COVID. The offsets are aimed at low and middle-income earners, and depending on your level of income may entitle you to up a $1080 offset. The biggest benefits will go to those earning $45,000 to $60,000 a year, although even people on $125,000 are entitled to some benefit.
Also, keep in mind that most government benefits are taxable. Payments that your employer makes to you based on JobKeeper payments should be treated as regular income and will attract tax.
So, take the time to investigate the options and you could end up with hundreds or thousands more in your pocket at tax time. The DG Institute’s accounting arm, DGI Accounting, are experts in tax regulations and tax effectiveness. Book a free tax assessment now with one of our tax specialists.
Lawyer, Asset Protection Specialist and Property Educator
Dominique Grubisa is a practising legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at firstname.lastname@example.org
This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.