COVID19 working from home and how to maximize your tax refund

It is that time of the year again, the time to prepare and lodge your tax return. As a tax return specialist in the individual tax return, it is our job and aims to work with you to improve your tax position. We will endeavor to assist you in claiming as much as legally entitled work from home tax return, hence your tax refund if there is any, could be maximized.

Under the COVID-19 regime, the Australian Taxation Office has offered a very generous tax deduction for the home office running expenses. With COVID-19, many of us work from home; we need to use our resources to produce the result for our employer. Hence under the new arrangement to be effective from 1 July 2020, you can claim up to 80 cents per hour for working from home, this is a drastic increase of a massive 54% increase from the previous 52 cents per hour. Also, because of COVID-19, people in the same households need to keep a safe distance and are required to work from home, hence, multiple people from the same household are allowed to claim this 80 cents per hour rate. Hence if you work 40 hours per week from home, you could be entitled a $768 to 30 June 2020, on a 24-week basis. #tax return #covid19

This method caters to the period from 1 March 2020 to 30 June 2020, and the Australian Taxation Office is reviewing extending it to a further period given the lockdown policy is still in place. Some of the larger organizations are thinking of working from home permanently.

It is essential to seek professional advice on the work from home tax return, as you need to put a unique description. Otherwise, the ATO might not allow you to claim this special higher hourly rate for the home office running expense.

The simplified method will cover all deductible running expenses, including electricity for lighting; cooling or heating and running electronic items, phone, and internet costs; and the decline in value of a computer, laptop, home office furniture, and furnishings

Previously, you could only claim 52 cents per hour for home office running expenses, and before FY2018, the hourly rate was only 45 cents per hour. Also, under the previous regime, you needed to claim the phone and internet expenses separately, now it has been grouped into one, to make it easier for the taxpayer.

It is essential to remember, that to claim the home office running expense effectively, you need to keep a proper timesheet or diary documenting how many hours you work on a per-day basis. You must follow the total TOTAL hours worked during the said period March to June, and you must exclude the time you take for the break, for example, going toilet, eating, drinking, or napping. It is also important to note that under the ATO guideline, you do not need to have a particular dedicated area to claim this deduction.

ATO assistant commissioner Karen Foat said the new shortcut method would make tax time easier for those who were working from home for the first time in light of the ongoing coronavirus pandemic.

“The shortcut method provides a rate of 80 cents per hour and will only require you to keep a record of the number of hours worked from home,” Ms Foat said.

“This recognizes that many taxpayers are working from home for the first time and makes claiming a deduction much easier.

“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.”

There are other two methods besides the shortcut method, which are the fixed rate method of 52 cents per hour, and the actual cost method, you can use either one and use one which gives you the best outcome.

ATO example:

Bianca is an employee who works as a copywriter and editor. Bianca starts working from home on 16 March as a result of COVID-19 and replaces her face-to-face meetings with online video conferencing.

Bianca has just bought a new laptop, desk, chair and stationery. She also wants to claim some additional gas, electricity, phone, and internet costs due to working from home.

Under the shortcut method, Bianca can now claim all her expenses at a rate of 80 cents per hour. All she needs is her timesheets.

Bianca can also decide to claim using existing working-from-home calculations. Under that method, she can claim the desk, chair, gas, and electricity under 52 cents per hour. Still, she would need to work out the decline in value of the laptop and calculate the work-related portion of the laptop, stationery, phone, and internet.

If you want your tax return to be done properly and with the view of having the tax position improve and refund maximized, please come and talk to us one of the most professional and specialized accounting firms in Sydney and Adelaide, please give us a call on 0410829900It is essential to seek professional advice on the work from home tax return