The global pandemic COVID-19 has completely changed the way the taxation department looks at working from home tax deductions. Previously, for you to claim any of your working from home expenses in your tax return, you had to have a dedicated home office.
Working from home tax deductions 2021 and 2022 are far more lenient now because so many people are forced to socially distance and have no other option. On top of a new definition to what is deemed appropriate for ATO deductions, there is a totally new system people can use to work out their working from home tax deductions in Australia.
What is the new system though? What can you claim working from home on tax? Do not worry! In this article we will walk through everything you need to know to do your tax return from the comfort of your own home!
What Qualifies A Tax Deduction
Are you asking, what can I claim on tax 2021 working from home? When it comes to how you tax work related expenses, there are three main criteria that must be met to be allowed by the ATO. These include:
- The money must be spent by you and must not have been reimbursed
- It must be a work related purchase
- You must have proof you have purchased it
When working from home, make sure you keep your receipts for anything relating to the above criteria so you can claim it as a tax deduction. Tax deductions without receipts can be extremely tricky, you can read more here.
However, the global pandemic also introduced a new method to calculate your tax deductions when it comes to working from home, so keep reading below.
WFH Tax Deduction Method One: Running Expenses
The first method that you can use to calculate your working from home tax deductions is the running expense method. This is used for when you only do some of your work from home (such as during COVID-19) and do not have a dedicated office space.
To use this method, you must keep a logbook of all the hours you work from home and you can claim a nominal rate of $0.52 per hour you work, as a tax deduction. This nominal rate is designed to include:
- Air conditioning costs
- Electricity
- Water
- Rent
- Mortgage interest
The running expense does not include things like your phone, internet, office furniture or computer use, so you will have to calculate those costs separately.
WFH Tax Deduction Method Two: The Shortcut Method
The shortcut method was introduced as a countermeasure to COVID-19 and is designed to make things even easier for people at tax time. The ATO claims that this new method is the “shortcut way to claiming your running expense during COVID-19”.
With the shortcut method, you still have to log all the hours that you work from home. You can then claim 80c per hour working from home. This method is designed to cover all of your working from home expenses, so you cannot also claim things like your computer, phone, and internet use.
Which Method Should You Choose?
So, you’ve worked out what the two methods you can use are and you’ve either got; one with a smaller nominal rate at $.52ph, but you can claim extra expenses, or you’ve got one with a higher nominal rate at $0.8ph, but you can’t claim extra expenses.
It’s all very nice and well that you know what the two methods are, so how do you work out which one you should choose? Well that completely depends on what your situation is and what your needs are.
If you think you don’t use your computer, internet and phone very much for work compared to your personal use, the shortcut method is probably the best for you.
Additionally, if you find it hard to work out these things for your tax return, the shortcut method will again probably be better for you because it is easier to work with.
However, if a large portion of your home computer, internet, mobile phone, and other expenses are used so you can work from home, the regular $0.52ph running expense method will be better for you.
If you are completely stuck on which one you should use and you can’t even work out how to claim electricity on tax, you should contact a tax professional.
Home Office Tax Deduction Method: Occupancy Expenses
If your permanent place of work is also your home, and you have a designated office space, then you can claim even more extensive tax deductions using the occupancy expense method.
For this method, you have to work out how much you use each item you own for work as a percentage compared to your personal use.
You also must work out the size of your office space compared to the rest of your home and claim that portion of your bills.
Some Other Broad WFH Tax Deductible Expenses
On top of the expense methods discussed above, there are further tax deductions that you can claim that are more broad. For a more extensive list, see a tax agent. Some of the broad expenses include:
- Car expenses if you use your car for work to see clients or carry heavy equipment
- Self education that will help you in your current job
- Union membership fees
- Stationary and equipment
- Industry specific magazines and books
- Computer, laptops and software purchases
The Surefire Way To Maximise Your Tax Return
Did you know that you can also claim the money you spend on a tax professional as a tax deduction? If that’s the case, and a tax professional can significantly boost your tax refund, why wouldn’t you use one?
If you want a quick, easy, surefire way to make sure you claim all of your working from home expenses in your tax return, then look no further than One Click Life.
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Life admin can be tedious, boring, and easy to make a mistake with, so let us take care of it. By letting us do it for you, you can make sure you’re spending your time on the things you love doing!
When it comes to online tax returns in Australia, we really will make sure you maximise your tax refund.