As your employee’s stare down the prospect of a sustained period working from home without many of these things, they will be considering the increased personal costs. Although a coffee machine for their new 'office' and free breakfasts are not on the list, what can your employees consider come tax time?
What could be claimed
While working from home, your employees will have to consider more than just their mobile phone, computer and personal internet. A productive home working environment also needs to be kept clean and tidy, particularly for employees whose kitchen table now plays the role of open-plan office and potentially school in the upcoming months.
Although rent and mortgage interest costs are not on the claim list, employees may be able to claim for a percentage of many of the other unforeseen personal costs - provided they are recorded correctly.
There are four main areas to consider:
2. running costs
3. repair costs
Here is a top-line summary of what could be claimed under each:
- update costs
- small items under $300 – these can be claimed as an immediate write-off
- running costs
- heating, cooling and lighting
- phone (mobile and landline) and internet
- stationary and computer-related (e.g. printer ink and paper)
- cleaning of work areas
- repair (e.g. repairing home office furniture)
- depreciation (e.g. computers, mobile phone and office equipment).
Justifying a claim
There are two things essential for your employees to consider when making a claim related to their home office. Firstly, if they are unable to use a dedicated space (e.g. the kitchen), they can only claim for the hours they’re using it for working, not for the entire day.
Secondly, they are not permitted to claim if they are sharing the working space with another person. For this reason, if there is more than one person at home, advise your employees that they’ll need to be working in different rooms if they’re both wanting to claim.
There are a couple of distinct approaches used to justify a claim. Method one is to keep dedicated records of the exact times working and then compare these to individual bills for running costs.
Once a figure is derived for a four-week indicative period, this baseline is then used to determine future costs.
Method two is considerably more straightforward and involves using the Australian Taxation Office's (ATO) suggested flat rate of 52 cents per hour. Employees need to keep a record of the hours they work and multiply that by 0.52.
This calculation can be used for all running costs, excluding phone and internet usage. These will have to form part of a separate claim.
For those making claims for the period after 1 March 2020, your employees can claim 80 cents per hour for all their running costs, rather than needing to calculate costs for specific running expenses. If your employees choose to use this method, all they need to do is keep a record of the hours they worked from home as evidence for the claim.
Record keeping for taxable expenses incurred as a result of COVID-19 is going to be increasingly crucial moving forward so all employees should be advised to keep detailed records to maximise their ability to claim.
Preparing your employees for remote working, leave from the workplace or temporary business closure? To protect your business and people we have a range of support documents for your business.
The above information is general in nature. Please seek independent financial, taxation or other advice to see how this information relates to your personal circumstances.