Did the COVID-19 crisis have you working from home for some of this year? If so you’re not alone. With EOFY almost upon us, it’s important to know that there are certain expenses you can claim a deduction for if you were forced to work from home due to the health crisis. This may result in a better tax return this year. And who doesn’t need that right now!
This year tax time will be quite different for many of us. As property managers don’t normally work from home, it may be confusing to know what you can and can’t claim for this year. The unprecedented circumstances we all faced in the second quarter of 2020 resulted in more Australians than ever before isolating and working from home. As a result, the ATO is bracing itself for a hefty increase in work-related tax claims. But if you have never worked from home or for yourself before, where do you start? Firstly you need to know what you can and can’t claim. Then you need to know how to calculate what you are entitled to. Both are explained below.
What can I claim?
What you can claim depends on the method you choose (see below). However this list includes all allowable claims.
- Electricity and gas costs, as long as it relates to regulating temperature and lighting the work-related space of your home during work hours (so a proportion of your energy bill/s).
- Cleaning costs for your dedicated workspace.
- Phone and internet charges.
- Stationery and printer paper and ink.
- Home office equipment, including repairs (computers, printers, phones, furniture and furnishings), either the full cost up to $300 or the decline in value for items with a value over $300.
What am I not allowed to claim?
- Time spent not working, e.g. for your lunch break and home schooling.
- Any item provided by your employer, such as a phone or laptop.
- Any costs related to home schooling, such as the purchase of desks, computers and iPads specifically for this purpose.
- General household items normally provided by your employer in the workplace such as coffee, tea, milk, cleaning products and other general household items.
- Occupancy expenses such as mortgage payments, rent and rates.
How do I claim?
There are 3 ways to calculate your home office expenses:
- Shortcut Method – as the name implies, this is a simplified way to calculate your deductions but it has a defined time frame (1 March to 30 June) and only allows you to claim phone and internet costs, electricity and gas charges for heating, cooling and lighting, and the decline in value of equipment and furniture. Using this method allows you to claim a flat 80 cents per hour for every hour you worked from home between 1 March and 30 June 2020. If you spent $300 or more on work-related expenses, you may be better of using the actual cost method, however this method is quite time consuming. Bear in mind that if you use the Shortcut Method you only need to keep a record of the hours you worked at home in the form of a time sheet or diary notes, so it simplifies things enormously. Click here for details of the Shortcut Method.
- Fixed Rate Method – to use this method you need to have a dedicated work area such as a home office. Click here for details of the Fixed Rate Method.
- Actual Cost Method – this method allows you to claim the additional running costs you directly incur as a result of working from home. Click here for details of the Actual Cost Method.
The ATO recommends people use “the method or methods that will give you the best outcome, as long as you meet the criteria and record keeping requirements for each method”. Click here for a case study that compares each method.
While we would never recommend one method over another, as every situation is different, we can say that the ATO introduced the Shortcut Method in anticipation that taxpayers would struggle with all the bills and receipts they would need to provide for the other methods. Tax Institute senior tax counsel Professor Bob Deutsch says, “If you’re the person who usually in the end-of-financial-year period is running around trying to find the shoebox full of receipts to present to your accountant, you’re probably better off taking the shortcut method.”
At Maintenance Manager we are all about saving you time in property management by doing things more efficiently, no matter where you work. Click here to learn how or call 1300 155 888 for an obligation-free demonstration.