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Adjustment to work from home expenses

With the increased numbers of taxpayers working from home due to COVID-19, the ATO has released specific guidance softening the rules around claiming deductions for home office expenses, including a ‘shortcut’ set rate method.

Firstly, the ATO has reduced the usual requirements to be ‘eligible’ to claim the expenses, which usually require a specific area set aside for work purposes. During this period the ATO is allowing home office expenses to be claimed if:

  • The taxpayer is working from home to fulfil their employment duties or to run their business; and
  • They are incurring additional running expenses as a result.

Broadly, there are three mechanisms by which taxpayers will be able to calculate the deduction allowable:

  1. Actual expenses: This would involve a determination of the actual expenses incurred and establishing a percentage of work or business use to calculate the deduction.
  2. ‘Normal’ set rate method: Apply the ordinary set rate of 52 cents an hour (this covers claims for home office electricity, gas for heating, cleaning and the decline in value of home office items) and separately claim deductions for other expenses such as computer consumables, stationery, phone and internet expenses or the decline in value of a computer, laptop etc (i.e. on an actual expenses basis).
  3. The ‘shortcut’ set rate method: This allows a set rate of 80 cents an hour to be claimed, however, this covers all of the expenses mentioned in 2 above, both those included and excluded under the ‘normal’ set rate calculation.

Taxpayers will be able to choose which method provides the largest deductions, and it will be important to note that this may not always be the shortcut method.

To discuss your home office deductions call PPT on 5331 3711 (Ballarat) or 8391 3063 (Melbourne).

DISCLAIMER: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

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