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How to claim WFH expenses: ATO details rules

Maja Garaca Djurdjevic
Maja Garaca Djurdjevic
15 July 2020 3 minute readShare
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Small-business owners that have had to relocate their business to their home during the coronavirus crisis have a few options when it comes to claiming working-from-home expenses this tax time.

Speaking exclusively on the MyBusiness webcast, ATO assistant commissioner Andrew Watson explained that businesses must consider which method offered by the Tax Office fits their circumstances best, but he underlined that businesses can’t mix and match.

“You’ve got some choices there,” he said.

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“If you’ve got a dedicated home office, you can look at claiming a proportion based on floor space, a portion of the occupancy costs of your home, as well as looking at some of the running costs, such as heating, cooling etc.”

However, this year there is a temporary shortcut method, announced by the ATO for the period from 1 March to 30 June, but recently extended until the end of September. And while this method was initially introduced to assist employees that have had to work from home as a result of the COVID-19 crisis, business owners can make use of this method, too. 

 

“It’s a flat rate of $0.80 an hour. That’s a new one and it only applies since that first of March. It applies to both businesses that have suddenly become home-based, rather than have previously run as a home-based business, and employees,” Mr Watson explained.

However, as is the case with new measures, confusion has been brewing around whether businesses can claim small furniture they’ve had to buy as a result of their transition to a home-based office in addition to the $0.80 per hour.

Putting all misconceptions to rest, Mr Watson stressed: “If you are to use that $0.80 per hour, that covers everything.

“You then can’t look at depreciation or part of the mortgage or any of those other occupancy costs.”

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He advised small businesses to work through these technicalities with their tax agent, noting that businesses that were originally home-based, prior to the coronavirus crisis, have probably been claiming home office expenses for years.

Mr Watson continued: “For them it’s probably just looking at what’s changed over the last few months; have their [expenses] gone up, have you spent more time at home?

“If since COVID started you have relocated home, or as an employee of your business you’re doing more work from home, it could be that that shortcut method could work better for you, but it is a choice.

“You don’t have to go with the shortcut method, you don’t have to go with the traditional methods for home office expenses; this tax time, it’s your choice.”

He reiterated, however, that it’s one method or the other. 

“You can’t pick the eyes out of both, claim the $0.80 per hour and then also claim some other costs on top of that,” he said.

“The $0.80 an hour is an all-inclusive. So, if you’re buying a laptop as part of that home office arrangement, you wouldn’t be able to claim that separately.”  

Who can claim PPE?

Anderson Tax & Consulting founder Debra Anderson echoed Mr Watson’s sentiments.

“It’s worth noting that whatever you do this year could have consequences on what you do next year. You could claim the $0.80 but not claim depreciation costs. But next year, the rules may be different. So, make sure you see a tax agent,” she said.

Speaking also about personal protective equipment, Ms Anderson advised business owners to approach this area carefully.

She explained that whether or not a business owner is eligible to claim PPE depends on individual circumstances. 

“If you are operating a café, for example, and you have sanitiser and need gloves and masks to be able to do that, absolutely you can claim it,” she said.

“But if you’re like me and you’re working in your home office, no, I cannot claim a mask or sanitiser.”

She also revealed some odd questions she has been asked lately.

She said: “I’ve been asked if you can claim sanitiser because you need to touch client’s paperwork, things like that.

“Really, the rule is, if it’s of a private and domestic nature, no, you can’t. In your own home, no, it’s not claimable.”

For more insights into tax time 2020, tune into our new webcast here.

How to claim WFH expenses: ATO details rules
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Maja Garaca Djurdjevic
Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of My Business. 

Maja has a decade-long career in journalism across finance, business and politics. Now a well-versed reporter in the SME and accounting arena, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies and enabling citizens to influence decision-making.

You can email Maja on [email protected] 

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