There has been some good news out of the ATO recently with the “Shortcut” method for calculating a tax deduction for running costs incurred while working from home being extended to the 30th June 2021. This was originally provided to cover the period from 1st March 2020 to 30th June 2020 however with the ongoing battle against COVID-19 keeping many employees and business owners working from home, this shortcut method has now been extended to cover the full 2021 financial year too.
Eligible employees and business owners therefore can choose to claim additional running expenses incurred between 1 March 2020 and 30 June 2021 at the rate of 80 cents per work hour, provided they keep a record (such as a timesheet or work logbook) of the number of hours worked from home during the period.
The expenses covered by the shortcut rate include lighting, heating, cooling and cleaning costs, electricity for electronic items used for work, the decline in value and repair of home office items such as furniture and furnishings in the area used for work, phone and internet expenses, computer consumables, stationery, and the decline in value of a computer, laptop or similar device.
It is important to note that the “Fixed Rate” method is still available to use for this same period which allows eligible employees and business owners to claim home office costs at a flat rate of 52 cents per work hour. This method covers the same the additional running costs as the shortcut method but specifically excludes costs associated with phone and internet, computer consumables and stationery, and the depreciation of office equipment. These additional costs can be claimed based on the work-related portion of each item which must be supported by written records.
The “Fixed Rate” method may therefore be a better alternative for those with large work-related usage of phone, internet and electronic devices provided sufficient supporting documentation is available.
It is important to note that in most cases, if you are working from home as an employee and claiming a deduction under either of these methods, there will be no adverse impact on the Capital Gains Tax (CGT) treatment of your home.
Tip: This shortcut rate will suit many people, but if you choose to use it for your additional work-from-home running expenses, you cannot also claim any further deductions for the same items. We can help you decide whether the shortcut rate is the best option for your situation.