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Home office case study – Which method should I use?

There might be some confusion on which method is better for a home office claim. For those with a dedicated Home Office, home improvements such as setting up a backyard cabin, are considered justifiable business claims. As long as the item or improvements were explained adequately as work-related, then it can all be legitimately claimed.

The new COVID-19 shortcut method might seem that it helps you save more than the usual method, but does it really? We will look at this case study to find out.

Case Study

Jim is an office administrator who was forced to work remotely from home due to COVID-19 social distancing policies. When he works at home, he keeps records of his hours in a personal diary, which are standard office hours, 8 hours per day from Monday – Friday. For this example, the work from home period lasts for 16 weeks.

He takes office calls on his personal mobile phone, and uses his home internet to do work. His mobile phone bills are $50 a month, and his home internet bill is $75 a month. He estimates his usage for work purposes is approximately 50% for both.

Option 1: Shortcut Method (80c/hr)

Jim decides to use the Shortcut method of a flat rate at 80c/hr.

The amount that he can claim will be:

$0.80 x 8hrs x 5 days x 16 weeks = $512

Jim cannot make further claims for his home internet and phone bills separately when using this method.

Option 2: Fixed Rate (52c/hr)

Jim decides to use the standard fixed rate of 52c/hr.

$0.52 x 8hrs x 5 days x 16 weeks = $332.80

In addition, he can claim the work-related portion of his mobile phone and home internet bills.

Mobile Phone: $50 x 50% work related usage x 4 months = $100

Home Internet: $75 x 50% work related usage x 4 months = $150

Total Deduction: $332.80 + $100 + $150 = $582.80

From this example, we can see that Jim could actually save more by using the standard method. ($60.80 more in deductions) Depending on your circumstances, using the standard method might provide more benefits.