How best to calculate working from home rates at tax time 2020/21

Many Australians have worked from home during the COVID-19 pandemic. The Australian Taxation Office has provided new guidelines for assessing any tax deductions that may result from this new work arrangement in 2020/21.  If you worked from home during the period from 1 March 2020 – 30 June 2020 and/or 1 July 2020 to 30 June 2021 you can now choose one of two ways to calculate your possible tax deductions.

The ‘shortcut’ method.

The shortcut method has been extended and allows you to claim 80c per hour for each hour worked from home, from 01 March 2020 to 30 June 2020 (2019/20 income year) and 01 July 2020 to 30 June 2021 (2020/21 income year). This one-stop method covers all expenses and extra costs from working from home, so you cannot claim additional items on top of this like purchase of equipment or internet bills. You must record all hours and keep records of all hours spent working from home during the 1 March – 30 June period for your tax return.

For example, if you worked 320 hours from home during the financial year and you multiple that by $0.80, you may claim a deduction on your tax return of $256.

This shortcut rate is usually the most simple for people who usually work in an office for an employer, but due to COVID-19 found themselves working from home for some or all of the time in 2020/21.

Fixed-rate method

You can claim 52c per hour for work from home with the fixed-rate method. In addition, you can separately claim the work-related portion of your phone, internet costs and office consumables. To use this method, you must have a dedicated office space in your home, and you must keep records of your time — usually a diary over a four-week period tracking your hours. In addition, you must keep receipts for any claimable items or equipment you include on your tax return. (Remember, you cannot claim items that are already paid for by an employer, for example a company phone.)

This method is often used by those people who work from home regularly, or who run their own business. Small business owners may also be eligible for the Instant Asset Write Off which may cover work-related equipment. Details here from the ATO website: