Australia: Guidance on claiming working-from-home expenses (COVID-19)

Australia: Claiming working-from-home expenses

The Australian Taxation Office (ATO) released guidance for employees and business owners about the tax treatment of working-from-home expenses for those who work from home because of the coronavirus (COVID-19) pandemic.

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The ATO guidance—PCG 2020/3 Claiming deductions for additional running expenses incurred whilst working from home due to COVID 19—is relevant for employees and business owners in preparing their tax returns for the financial year ended 30 June 2020 and beyond, and generally provides a “short-cut rate” to calculate additional running expenses for the period of working from home. The short-cut rate is an alternative to the current fixed rate and actual methods in calculating additional running expenses working from home.

The short-cut rate allows the taxpayer to claim a tax deduction at 80 cents* per hour every hour that is worked at home. The hourly rate covers all additional running expenses such as:

  • Electricity (lighting, cooling/heating and electronic items used for work, for example a computer) and gas (heating) expenses
  • The decline in value and repair of capital items such as home office furniture and furnishings
  • Cleaning expenses
  • Phone expenses including the decline in value of a phone handset
  • Internet expenses
  • Computer consumables
  • Stationery
  • The decline in value of a computer, laptop or similar device

Taxpayers that use the short-cut rate to claim a deduction for their additional running expenses cannot claim a further deduction for any of the expenses (listed above).

The ATO’s guidance applies to employees and business owners during the period from 1 March 2020 who are:

  • Working from home to fulfil their employment duties or to run their business (working from home) during the period from 1 March 2020 until 30 September 2020, and
  • Incurred additional running expenses that are deductible under the general deductibility provisions (section 8-1 of the Income Tax Assessment Act 1997) and depreciation allowance provisions (Division 40 ITAA 97) as a result of working from home.

Employees and business owners will need to record the number of hours they worked from home to evidence their claim under the short-cut (80 cents) per hour method. There will be a new disclosure item “COVID-hourly rate” for the deduction for home office expenses in the 2019-20 and 2020-21 tax returns.
 

*Australian currency

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