ATO Announcement: Shortcut method for claiming home office running costs

Australian Government COVID-19 Stimulus

The Australian Taxation Office (ATO) has just announced that in response to the COVID-19 pandemic; from 1 March 2020 to 30 June 2020, a simplified method can be used by taxpayers to calculate and claim their work from home expenses.

As always to claim a deduction the taxpayer will have to:

have spent the money
prove the expense was directly related to earning their income
have a record to prove it

Simplified Calculation Method (1 March to 30 June 2020)

To make the claim, the taxpayer will simply calculate the number of hours that they are carrying out genuine work from home multiplied by 80c/hour.

Whereas previously the following would need to be made as separate claims, under the new simplified method, the following are included in the 80c/hour calculation:

electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses
the decline in value and repair of capital items, such as home office furniture and furnishings
cleaning expenses
your phone costs, including the decline in value of the handset
your internet costs
computer consumables, such as printer ink
stationery
the decline in value of a computer, laptop or similar device

Fixed-rate and Actual Cost Calculation Methods (1 July 2019 to 29 February 2020)

You can make a claim for home office running costs for the 1 July 2019 to 29 February 2020 period using the following methods:

Fixed-rate method ─ claim all of these:

a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture,
the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery, and
the work-related portion of the decline in value of a computer, laptop or similar device

Actual cost method ─ claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.

You can still use the fixed-rate or actual cost method for the 1 March 2020 to 30 June 2020 period if you want to, HOWEVER, you will not be able to claim using the simplified method for the same period

For more information on how to calculate and claim a deduction under the actual cost method or fixed rate method see the ATO's webpage on Home office expenses.

Substantiation

According to the ATO, an individual will only be required to keep a record of the number of hours worked from home as a result of the Coronavirus, during the period 1 March to 30 June 2020. This record can include timesheets, diary entries/notes or even rosters.

If you use the shortcut method to claim a deduction and you lodge your 2019-20 tax return through myGov, you must include the note ‘COVID-hourly rate’ in your tax return. Our clients will have this note automatically included in their return.

Expenses you can’t claim

If you are working from home only due to COVID-19, you:

cannot claim occupancy expenses such as mortgage interest, rent and rates
cannot claim the cost of coffee, tea, milk and other general household items your employer may otherwise have provided you with at work