It’s been an unusual financial year. From July to October, much of Australia was in lockdown with the work from home (WFH) arrangements to match. Since then, you might have gone back to the office full-time, kept logging on to your morning Zoom meetings from the dining room table, or adopted a hybrid setup.
So what impact do those ever-changing work arrangements have on our tax returns? With 30 June just a couple of days away, here’s a brief rundown of what you can – and can’t – claim as we navigate the new nine-to-five.
What if you split your time between home and office?
This year, the ATO is again offering a simplified way to claim WFH costs. It’s called the shortcut method, and was first introduced last financial year because of the pandemic.
The shortcut method allows you to claim 80 cents an hour for every hour spent working from home. The catch is that it encompasses absolutely everything you might want to claim – your phone, internet, electricity, gas, furniture, computer, printing, and stationery. You can’t make any additional claims for home office costs on top of that 80-cent rate.
For that reason, you may be better off sticking with the original method for claiming WFH costs, known as the fixed rate method. It allows you to claim 52 cents an hour for every hour spent working at home – and your phone, internet, computer products, printing and stationery costs as well. (Your furniture, electricity and gas, though, are already included in the 52 cent rate.)
“I’ve done about 3,000 tax returns in the last two years and the fixed rate method will work out favourably for the majority of people,” says Helen Francis, an accountant who is also known as The Tax Mermaid.
Brendan Campbell, an accountant at Prosperity Wealth Advisors, agrees it is typically the better option. Claiming the fixed rate method will, however, require you to figure out what percentage of your phone and internet usage was work-related, so that you can claim only that amount – what’s known in the tax world as “apportioning”.
“If you can go to the effort of working out that, it would mean a better claim for you,” Campbell says. “But if not, claim the 80 cents per hour. It’s better than not claiming anything.”
I’m back to the office now. Can I claim that computer I bought in July?
As long as you’re using the fixed rate method for your WFH expenses, then yes. However, you might not be able to claim the full cost in one go. Items over $300 need to be depreciated, which means that you claw back the cost of it over a few years across the product’s lifespan.
And you’ll probably need to do some apportioning. That shiny new computer you bought for work at the start of lockdown and now only use to stream Netflix, for instance?
“The claim is going to be quite small, because you start the depreciation in July and you’ve got to stop it in October when you’re no longer using that computer solely for work,” says Francis. “So if you’re claiming a $2,000 computer, firstly, it needs to be depreciated over probably three years. That’s already limiting your claim, then you’ve got to cap it at only the four months we were lockdown, because that’s the only time you were using it.
“So the claim will be quite small. It won’t be the whole cost of the computer.”
Is my commute deductible now?
Sorry, but no.
“You can never claim commuting to and from the office, pre- or post-pandemic,” says Francis. “It’s not an allowable deduction.”
There are a couple of exceptions to this rule. One is for those who have to carry bulky equipment to work – this typically applies to tradies, but could also include teachers who have to bring in a lot of class supplies on the first day of school.
The other is if you’re travelling between two places of work, like driving from the office to an off-site meeting. But that doesn’t typically apply to those opting to split their time between home and the office.
“Checking a few emails and doing an hour’s work at home, then travelling to the office would not normally constitute travel between two places of work,” Campbell says. “Whereas if someone was required to work from home in the morning and then required to come into the office halfway through the day, then that trip would be deductible. The emphasis would be around ‘required’.”
Australians who genuinely must drive to meetings in their own car or transport bulky equipment can claim 72 cents a kilometre for work-related trips to help cover the cost of fuel. That rate, sadly, hasn’t gone up with the rapidly rising price of petrol this financial year.
Here’s something new: you can now claim your RATs
One small gift from the ATO this year is the ability to claim black those very expensive rapid antigen tests. If, of course, you were swabbing yourself for work-related purposes.
“They have to be specifically work-related RATs – you have to be taking them in a circumstance that will either allow you or not allow you to go to work,” says Francis. “So it can’t be one that you’ve purchased to go out on a Saturday night. It’s got to be work-related and not already reimbursed by your employer. And yes, you need [to have kept your] receipts.”
Similarly, if you had to buy your own PPE, masks or hand sanitiser to go to work, you can claim those expenses as well.
The things you can’t claim
You might be tempted to take liberties with those WFH expenses. But that’s probably not a good idea, Francis says.
“A lot of people have taken the piss a little bit, claiming couches and furniture that’s not really home office-related. There’s been some people claiming athleisure wear because that’s what they wear while they’re working. One guy wanted to claim his lawn mower because he was sitting outside to work,” she laughs. “But the tax office is all AI. So if you’ve claimed something that’s not really related to the occupation code you listed in your tax return, you’ll be flagged for an audit.”
And be wary of copy-pasting in old info from pre-pandemic years, on top of claiming your new WFH expenses.
“What they’re looking at this year is claims that don’t really make sense,” Francis says. “Like, if you’d been working from home full time but then you’ve got $5,000 worth of car expenses, then that’s going to flag.”
The deduction tax agents want you to know about
It’s not pandemic related, but there is one dependable way to lower your tax bill: make a voluntary super contribution.
“That’s my favourite way to do it, because you’re not actually wasting your money on things that you might not need in a few months’ time and you’re investing in your retirement,” Francis says.
Sweetening the deal, the ATO even increased the amount you can make as a voluntary contribution this year from $25,000 to $27,500. They’re also now allowing you to carry forward any unused voluntary contributions if your super balance is under half a million dollars. So if you’ve not maxed out your voluntary contributions in previous years, “you can catch those up and claim those this year or next year,” Campbell says.
There is one caveat: “To be deductible this year, any contributions must be received by the fund by June 30. That means you can’t really make payments on June 30, because the fund won’t receive them in time.”
So if you want to claim that sweet super tax break this year, you’d better hop to it.