The COVID-19 driven transition to working from home has driven a surge in purchases of desks, printers, and other office supplies – but when tax time comes, experts warn not to jump too quickly at a shortcut tax deduction introduced by the Australian Taxation Office (ATO).
Working-from-home purchases can be eligible tax deductions if used for work purposes, but taxpayers can now choose an alternative shortcut method that allows a deduction of 80 cents per hour, per person, for all expenses related to working from home.
This deduction – which works out to $32 for a full 40-hour work week – includes service fees such as heating, lighting and Internet as well as equipment purchased specifically for working from home.
It can be claimed by each household member who is working from home, and does not require having a dedicated working-from-home area.
The new method, which can be applied retrospectively to 1 March, “recognises that many taxpayers are working from home for the first time and makes claiming a deduction much easier,” assistant commissioner Karen Foat said in announcing the new method.
“If you choose to use this shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim.”
The new shortcut is the third option the ATO provides for deducting work-from-home expenses; also available is a 52 cents per work hour deduction that covers heating, cooling, lighting, cleaning, and depreciation in the value of office furniture.
Taxpayers can also use the conventional method of individually deducting the work-related portion of all running expenses.
Not necessarily the best option
With so many Australians now working full-time from home, the new deduction offers a simple way to realise the tax benefits of the new situation without being buried in paperwork.
One recent ATO audit found that nearly 700,000 taxpayers had wrongly claimed $2 billion of deductions on expenses including dental costs, beer, gambling losses, a Lego set and a wedding.
To maximise your actual deductions, accountant and ‘Tax Man’ Adrian Raftery says it may be worth your time to put in the extra effort.
“I would be encouraging people to keep a record of their spend,” he says. “My expectation is that for the majority of people, it would be well worth their while keeping the actual records – and if nothing else, you have the option at the end of the year to do the calculation comparing the different methods.”
Depending on your income-tax bracket, the $32 you save every week will only actually return anywhere from $6.72 (for those making up to $37,000 per year) to $15.04 (for those making over $180,000) back into your pocket.
Based on a six-month COVID-19 isolation period, that works out to a reduction in your tax payable of anywhere between $174.72 and $391.04.
Only those making under $18,200 would pocket the entire amount.
Do the maths at tax time – but depending on your circumstances, you could potentially save more by depreciating individual items if you’ve spent around $1000 on new office supplies for your home-working stint.
And that, Raftery says, will become increasingly likely as the working-from-home revolution wears on.
“People would have bought webcams, chairs, desks and more,” he told Information Age. “And if they haven’t, they will be doing so shortly.”
“I know a few of my mates are already complaining about sore backs from doing work at the kitchen table – so I can see them buying a good work chair to make it a bit more comfortable.”
A recent OnePoll survey of 1,000 coronavirus home workers found 31 per cent are working from their kitchen tables, with a further 11 per cent working from their bedrooms.
The rapid surge in working-from-home arrangements has forced employers, employees and service providers to readjust their expectations and operations.
National broadband network (NBN) operator NBN Co has been augmenting available bandwidth to maintain network performance, while many employees are contemplating extending working-from-home arrangements indefinitely after realising benefits including better use of commuting time, less stress, and better concentration.
A recent Gartner survey of CFOs and finance leaders found that 74 per cent expect to move at least some of their workforce to permanent remote-working positions.