If you are an employee working from home or a business owner who runs your business from home, you can request for a deduction. You have to pay Capital Gain Tax (CGT) if your workplace is your home. But in case, if you are an employee working at home, then there will be no CGT implications. The three different methods to calculate the home office expenses are:
- Shortcut method (80 cents) – only available 1 March to 30 September 2020
- Fixed rate method (52 cents)
- Actual cost method
1. Shortcut Method
This is a temporary method which is applied from 1st March 2020 till 30th June 2020. According to this method, you can gain 80 cents for an hour. You don’t need to have a dedicated work area to use this method. Maintaining a record of the number of hours you have worked from home is essential. If this method is chosen you can’t claim any other costs or expenses done while working from home. The formula used to calculate the number of worked hours is given below. No. of hours worked at home from 1st of March till the 30th of June 2020 x 80 cents
This method includes decline in value of all items. If you choose to use this method, there is no requirement to separately calculate the decline in value of equipment or depreciating assets. However, as you may combine methods or use a different method in later years it’s important to keep all records. If you had a work from home arrangement before 1 March 2020, you will need to use one of the existing methods to calculate your deduction for the period of 1 July 2019 to 29 February 2020.
2. Fixed-Rate Method
You can claim a deduction of 52 cents for each hour you work from home for the work-related expenses you incur for additional running expenses. You should have a dedicated work area as home office when working from home.
This method doesn’t include the following, so you will need to separately calculate your work- related use for:
- Computer consumables and stationery
- Phone expenses
- Decline in value of equipment (phones, laptops, etc.)
- Internet expenses
The following formula helps you calculate the deduction value. No. of hours worked at home x 52 cents
A four-week representative period determines the rest of the year for a complete deduction amount. But in case if the pattern changes a new record should be created. Additionally, you will be able to claim the depreciation of all assets and devices purchased above $300.
Note: If you have been working from the 1st of July 2019 till the 30th of June 2020 you can claim deductions by two options.
- You can claim the whole year’s deduction using the fixed-rate method
- Or you can claim the fixed-rate method for the period of 1st of July 2019 to 28th of February 2020 and claim the shortcut method for the1st March 2020 till 30th June 2020.
3. Actual Cost Method
You can claim the additional running costs you directly incur as a result of working from home. If you do not have a dedicated work area like a home office, you will gain a minimal additional running expense. Likewise, if you are sharing an asset with another individual or other members who are working in the same area, or same device the calculation of expenses should be distributed accordingly. In this case, you cannot obtain additional costs for heating, cooling and lighting. To calculate the work-related expenses, you can
- Keep track of the number of hours you have been working,
- Maintain a record to represent the usual pattern of working from home for four weeks
Rather than calculating each expense and making a percentage, you can claim 52 cents per hour tax rate for all the expenses. Regardless of the method you choose, you will need to maintain records. If you usually work from home one day a week and due to an emergency situation, such as COVID- 19 or bush fires you’re required to work from home for a period, you will need to keep separate records for both situations.
| Type of method | Can be claimed | Cannot be claimed by any method |
|---|---|---|
1. Shortcut Method | * Internet expenses | * The basic household items provided for you at your office like tea, coffee, milk, etc. cannot be claimed when working from home |
* Electricity expenses (lighting, cooling and heating) | ||
* Phone call charges | ||
* Devices used with computer like printer, scanner, ink and stationery. | ||
* Decline in value for furniture over $ 300. | ||
2. Fixed-Rate Method | ||
* Depreciation value for assets less than $ 300 | * The time spent when not working (times when you take care of your children, lunch break, etc.) | |
* Electricity charges (light, cooling and heating) | ||
* Gas charges | ||
* Repair expenses on devices used for work | ||
* Depreciation of assets bought above $ 300 ( additional) | ||
* Occupancy expenses ( rent, mortgage interest, water rates, land taxes and house insurance premiums | * Children’s cost like online learning, purchasing of electronic device for studies, teaching them from home etc. | |
3. Actual Cost Method | ||
* Decline in value of assets valuing more than $300 | ||
* Computer consumables | ||
* Electricity charges (heating, cooling and lighting) | ||
* Phone call charges | * Deduction for devices and products provided by your employer cannot be claimed | |
* Decline in value of devices used for work | ||
* Cleaning expenses | ||
* Home office areas used during work | ||
*Occupancy expenses |
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