Short cut method for claiming home office costs

 

What is the short cut method?

The Australian Taxation Office (‘ATO’) has announced a temporary simplified short cut method to make claiming deductions for additional home office expenses incurred (e.g. additional heating, cooling and lighting costs), easier for individuals as a result of working from home due to the Coronavirus pandemic.

Based on the announcement, the ATO will allow individuals to claim a deduction for all running expenses incurred during the period 1 March 2020 to 30 June 2020, based on a rate of 80 cents for each hour an individual carries out genuine work duties from home. This is an alternative method to claiming home running expenses under existing arrangements, which generally require an analysis of specific running expenses incurred and more onerous record-keeping.

ATO’s 80 cents per hour method covers all running costs

The 80 cents per hour method is designed to cover all deductible running expenses associated with working from home and incurred from 1 March 2020 to 30 June 2020, including the following:

  • Electricity expenses associated with heating, cooling and lighting the area at home which is being used for work.
  • Cleaning costs for a dedicated work area.
  • Phone and internet expenses.
  • Computer consumables (e.g., printer paper and ink) and stationery.
  • Depreciation of home office furniture, furnishings and equipment.

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The effect under the 80 cents per hour method, is that separate claims cannot be made for any of the above running expenses. As a result, using the 80 cents per hour method could result in a claim for running expenses being lower than a claim under existing arrangements.

Furthermore, according to the ATO’s announcement, under the 80 cents per hour method:

(a) there is no requirement to have a separate or dedicated area at home set aside;

(b) multiple people living in the same house could claim under this method; and

(c) an individual will only be required to keep a record of the number of hours worked from home as a result of the Coronavirus, during the above period.

Working from home running expenses that are incurred before 1 March 2020 must be claimed using existing claim arrangements.

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