Home Office Deductions During COVID-19

This article features in the July/August 2020 issue of Tax & Super Australia’s Outlook magazine, which is exclusive to members. If you'd like to become a member, please call our friendly Member Services team on 03 8851 4555. 

The volume of people working from home due to COVID-19 has shone a new light on home office expenses and deductions.

With more people working from home than ever, the ATO is accepting a temporary simplified method (or shortcut method) of calculating additional running expenses from 1 March 2020 until at least 30 June 2020. This period may be extended, depending on when work patterns return to normal. Under the shortcut method, taxpayers can claim a deduction of 80 cents for each hour worked from home due to COVID-19, provided the taxpayer:

  • is working from home to fulfil employment duties and not just carrying out minimal tasks, such as occasionally checking emails or taking calls, and
  • is incurring additional deductible running expenses as a result of working from home.

The taxpayer does not have to set aside a separate or dedicated area, such as a private study, of their home for working. However, having a dedicated space makes it easier to show that additional running expenses have been incurred. The shortcut method rate covers all deductible running expenses, including:

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

The taxpayer does not need to have incurred all of these expenses, but they must have incurred additional expenses in some of those categories as a result of working from home due to COVID-19. Where the shortcut method is used, the taxpayer cannot claim a further deduction for any of the expenses listed earlier. Records — timesheets, diary notes or rosters — must be kept of the number of hours worked from home as a result of COVID-19. Where taxpayers use the shortcut method to claim a deduction, the note “COVID-hourly rate” must be included in the taxpayer’s 2019-20 tax return. Where the taxpayer was working from home to some extent prior to COVID-19 and claiming home office expenses under the standard method set out in the following diagram, the taxpayer can transition to the shortcut method for the period 1 March 2020 to 30 June 2020 (or longer if this period is extended). Once the shortcut method ceases, the taxpayer can revert to their previous method of determining home office expenses.

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