Young woman sitting at the desk at her home, working on the laptop while her puppy pet sits on her lap. Freelancer work from home concepts in casual atmosphere.
Young woman sitting at the desk at her home, working on the laptop while her puppy pet sits on her lap. Freelancer work from home concepts in casual atmosphere.

Virus sparks scary tax return ‘warning’

Employees across the country are now working from home as the coronavirus pandemic rages on - but it could have serious implications at tax time.

Spending the work day at home instead of the office will be leaving many of us out of pocket, as we rely on home and mobile phones for work calls, use our own power and rack up other work-related expenses.

The good news is, you can claim a deduction at tax time - but it also comes with an important warning.

An ATO spokeswoman told it was an unprecedented situation for many.

"The ATO understands that family and community are most important right now, and that in response to COVID-19, many people may be working from home for the first time," the spokeswoman said.

"In you are an employee who is working from home, you may be able to claim a deduction for expenses relating to that work."

This may include deductions for the work-related portion of running expenses, such as lighting, cleaning, heating and cooling costs, as well as p hone and internet expenses.

To claim, you will need to have paid for those costs yourself - and not been reimbursed by your employer - and have records to support your claims.

"As an employee, generally you can't claim a deduction for occupancy expenses such as rent, mortgage interest, property insurance, land taxes and rates," the spokeswoman said.

"The exception is if your home office is your place of business, meaning you solely work from your home office. This includes instances where an employer provides their employee with no other location to work from.

"An employee's home office will not be a place of business if they are working there temporarily as a result of COVID-19."

She warned it was essential to keep records of your expenses, such as receipts or other written evidence, including for depreciating assets you have purchased, diary entries to record your small expenses of $10 or less totalling no more than $200, or expenses you cannot get any kind of evidence for and itemised phone accounts from which you can identify work-related calls, or other records, such as diary entries, if you do not get an itemised bill.

H&R Block director of tax communications Mark Chapman said there were pros and cons from working from home in terms of tax implications.

"Working from home comes with its own challenges, not least the additional costs that it imposes on employees. Think about it - increased utility bills, increased use of your personal mobile phone and home internet and even increased expenses on keeping your home working area clean and tidy are just some of the additional costs that many will face as they respond to the challenge of home working," he said.

Mr Chapman said if you work from home, you can claim the work-related proportions of household costs such as heating, cooling and lighting bills, the cost of cleaning your home working area, depreciation of home office furniture and fittings, office equipment and computers, costs of repairing home office equipment, furniture and furnishings, phone and internet expenses and computer consumables like ink and stationery.

Small capital items such as furniture and computer equipment costing less than $300 can also be written off in full immediately.

But there are several important factors to consider.

"You might think that you can claim a percentage of rent or the interest on a mortgage if you're working from home using a home office. Sadly, this isn't allowable," Mr Chapman said.

If you don’t keep proper records, it could cost you.
If you don’t keep proper records, it could cost you.


"Ideally, you should have a specific room set aside as a home office. If you are using a room with a dual purpose - for example, a dining room - or a room shared with others (such as a) lounge room you can only claim the expenses for the hours you had exclusive use of the area."

There are two methods to make a claim.

If you opt for the diary method, you must keep a diary to work out how much of your household running expenses relate to doing work in your home office.

The diary needs to detail the time you spend in the home office compared with other users of the home office, and it should be kept for a representative four-week period.

"The 'work-use proportion' you come up with over that four-week period can then be applied to all your actual expenditure over the course of the year. Of the two methods this usually produces the larger deduction but the record-keeping requirements are more stringent," Mr Chapman said.

"It may well be that you are already work from home from time to time but that the amount of home-working will spike over the next few weeks or months.

"If that's the case, keep a separate diary for the period of your 'corona-induced' home working to justify the larger claim over this period - and don't try to apply this larger work-related proportion to the whole year."

The second option is the "ATO rate per hour method", which allows you to use a fixed rate of 52 cents per hour for home office expenses for heating, cooling, lighting and the decline in value of furniture instead of keeping details of actual costs.

Instead, you only need to keep track of the number of hours you use the home office, and multiply that by 52 cents per hour.

You can also make a separate claim for phone and internet expenses, computer consumables and stationery and the depreciation of computers or other equipment.

"Finally, a word of warning: It is quite common for people to have insufficient documentation to support a home office claim, particularly around the proportionate split between business use and personal use so be sure to keep records," Mr Chapman said.

"Make sure you keep receipts for any financial outlay incurred like utility bills because you will need them at tax time - get used to keeping those records, because if you get to June 30 and you haven't kept them, unfortunately it will be too late and you won't be able to go back and recreate them.

"People have got enough on their plate at the moment without worrying about this so if you're not sure what to do and what you can claim, speak to a tax agent - give them a ring, talk through it and if you don't have one, get one."

Meanwhile, according to Officeworks, binders and binder accessories, copy and laser paper, w riting instruments, b everages and sweeteners, p aper filing, p ads and books, b athroom and kitchen paper, s tationery consumables and f lags, notes and tabs are just some of the working form home staples that could be deductible this end of financial year.

"Tax time can be overwhelming and complicated for some people, especially those who decide to tackle their tax return on their own. But it doesn't have to be - speak to an expert, they can provide guidance on what you can claim and identify exactly what you need to do to get sorted and, ultimately, maximise your return," Officeworks spokeswoman Sandy Young said.

Originally published as Virus sparks scary tax return 'warning'

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