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Insight – Coronavirus Update

13 min read

Working from home

What do I need to know about my taxes if I work from home?

The ATO says one in three taxpayers makes a claim for work away from employer premises. In most cases, that is a relatively small claim for occasional home working, such as at weekends, in the evenings, or whilst staying home to let a tradie in. Until now, very few employees have routinely worked from home on a long term basis. However, over the past year or so, the number of people working from home has increased as employers and employees across the country adapt to new ways of working.

If you are an employee who is now working from home, or expects to work from home soon, you should know that if you incur extra expenses through working from home (which aren't reimbursed by your employer), you should be able to claim a tax deduction for those costs.

What can I claim when working from home and how can I get the most out of these claims?

If you work from home, you can claim the work-related proportions of household costs such as:

  • Heating, cooling and lighting bills

  • Costs of cleaning your home working area

  • Depreciation of home office furniture and fittings

  • Depreciation of office equipment and computers

  • Costs of repairing home office equipment, furniture and furnishings

  • Small capital items such as furniture and computer equipment costing less than $300 can be   written off in full immediately (they don't need to be depreciated)
  • Computer consumables (like printer ink) and stationery

  • Phone (mobile and/or landline) and internet expenses

These costs can be claimed if you are working from home fulltime, part time or just doing a bit of additional work from home. Ideally, you should have a specific room set aside as a home office. If you are using a room with a dual purpose (e.g. dining room), or a room shared with others (e.g. lounge room) you can only claim the expenses for the hours you had exclusive use of the area.

What else do I need to know?

The key information is to understand what you can claim and how you can claim. There are two ways to make a claim.

The easiest option is to claim the ATO's flat rate allowance for home working of 52 cents per hour. This covers the extra costs of heating, cooling, lighting and the decline in value of furniture. All you need to do to claim this is to keep a diary of your home working (over a representative 4 week period) – note the time you start work from home each, day, the time you finish work from home each day and any breaks. You can then claim 52 cents per hour for each working hour. In addition, you can also make separate claims for the work-related proportion of items like your home internet, mobile phone costs, decline in value of office equipment such as computers, laptops and phones and other expenses that directly relate your work, like stationery and printer ink.

Alternatively, you can claim the actual costs you've incurred. You'll still need to keep a diary of your home working and you'll also need to work out the amount of your home (by floor area) that you're using as your work space. From this, you can then work out the work-related proportion of your household expenses and apply this percentage to the actual amount you spend on electricity, gas and water. The work related proportion of phone and internet expenses can also be claimed, as well as decline in value on office furniture and equipment. You'll also need to keep all the original bills to prove your claim. This generally produces a bigger claim than the 52 cents flat rate but the amount of paperwork and calculation involved is much greater. You should use a tax agent to help with your claim if you intend to use this method. In addition, you can also make a claim for direct expenses like stationery, printer ink and cleaning materials.

From 1 March 2020 until 30 June 2021, the ATO also allowed an alternative ‘shortcut method’ for claiming expenses incurred when working from home. Using this method you calculate your deductions at a rate of 80 cents per hour for each hour worked from home. To use this method you are not required to have a dedicated work area. However, this method includes an allowance for all expenses, including electricity and gas for heating, cooling and lighting, phone expenses, internet expenses, the decline in value of equipment and furniture and stationery. No additional expenses can be claimed for these items. As such, this method of calculation generally results in a lower claim.


What can people be doing now to make tax time easier?

As you've seen above, the key to making a claim is to keep records to prove your claim.

At the very least, you'll need to keep a record of the time you work from home (if you simply intend to claim the ATO's flat rate 52 cents per hour amount). If you want to claim your actual expenses, you'll need to keep all receipts, bills, etc. Make sure you keep these records from now on – don't try to recreate things retrospectively when Tax Time comes. You won't be able to remember exactly what your working hours were and the chances are you won't be able to find all your receipts – meaning your claim could be lower than it should have been.

Be proactive, file receipts and bills somewhere safe and consider keeping electronic copies in one place on your phone or laptop.

Pandemic Leave Disaster Payment

The Australian Government is providing support for individuals who can’t earn an income because either they:

  • must self isolate or quarantine at home or
  • are caring for someone with COVID-19
A one-off payment of $1,500 is available to eligible workers in all Australian states or individuals under these circumstances. This payment is not available for workers who are already receiving another form of income or government assistance.
Pandemic Leave Disaster Payments are being administered by Services Australia. Applications can be made using your Centrelink online account (Pandemic Leave Disaster Payments) through myGov.
 
This amount is taxable income and must be reported on the tax return.


COVID-19 Disaster Payment

A payment is available for each period of lockdown for eligible workers in all Australian states who are unable to work and earn income as a result of a state lockdown of 7 or more days. The payment is:
  • $325 for workers who lost 20 hours or less of work
  • $500 for workers who lost 21 hours or more of work.
This payment is not available for workers in receipt of any of the following payments:
  • Income support payments
  • Pandemic leave disaster payment
  • Business support payments
In addition, workers must have used up other pandemic state based entitlements and all leave entitlements, except annual leave, and have liquid assets of $10,000 or less.
COVID-19 Disaster Payments are being administered by Services Australia. Applications can be made from Tuesday 8 June 2021 using your Centrelink online account through myGov.
This amount is taxable income and must be reported on the tax return.


COVID-19 Test Isolation Payment

The COVID-19 test isolation payment is a $450 payment from the Victorian Government. This is available to Victorian workers to provide financial support while they self-isolate to wait for the results of a coronavirus test. This payment may be received by recipients of the $1,500 pandemic leave disaster payment.
This amount is assessable income and must be reported on the tax return.

Major superannuation changes


Relief for Retirees during the coronavirus pandemic

Recognising the significant impact that the coronavirus is having on financial markets, the Federal Government has announced a temporary reduction in the minimum pension drawdown requirements for retirees.

A minimum drawdown is required each year by those who have account-based pensions and similar products, in order to maintain the tax exempt concessions they provide. This minimum drawdown is calculated each year using an age-based percentage and the retiree's pension account balance.

The minimum drawdown will be reduced by 50% for the 2019-20, 2020-21 and 2021-22 financial years.

If a retiree has made drawdowns in the current financial year that exceed the new reduced minimum drawdown requirement, they can NOT put the excess back into their superannuation account.

Age

Default minimum drawdown rates (%)

Reduced rates for the 2019-20, 2020-21 and 2021-22 financial years

Under 65

4

2

65-74

5

2.5

75-79

6

3

80-84

7

3.5

85-90

9

4.5

90-94

11

5.5

95 or more

14

7


Business Tax Changes


Business Investment

A range of investment incentives have been provided to assist businesses purchasing assets.


Temporary full expensing

Temporary Full Expensing allows a business to claim an immediate deduction for assets first held at or after 6 October 2020. This measure was scheduled to cease on 30 June 2022, but as part of the 2021-22 federal Budget, it was announced that it will be extended to 30 June 2023.
This concession is available for businesses with a turnover of less than $5 billion. For larger businesses (those with a turnover of more than $50 million but less than $5 billion), temporary full expensing is not available in respect of the acquisition of second hand assets or assets the taxpayer has committed to acquire prior to budget time 2020 (6 October).
For business with a turnover of less than $10 million that have chosen to use the simplified small business depreciation method, there is an additional concession under the temporary full expensing measures.
The simplified small business depreciation method is an optional method of depreciation available to businesses with a turnover of less than $10 million. Using this method, assets acquired prior to the introduction of temporary full expensing, for which an immediate deduction could not be claimed, would have been allocated to a small business pool and a deduction claimed at a rate of 15% in the first year and 30% in subsequent years. Under the temporary full expensing measures, the full remaining value of the assets in the small business pool will be claimed as an immediate deduction.
Businesses not using the simplified small business depreciation method, can opt out of the temporary full expensing if they prefer.


Backing business investment

Backing business investment allows for an accelerated depreciation of eligible assets held and first used or installed for a taxable purpose between 12 March 2020 and 30 June 2021.
Businesses with aggregated turnover of less than $500 million dollars in the income year that do not use the simplified depreciation rules (either because they are not eligible or they have chosen not to, may be eligible to deduct an amount under the backing business investment – accelerated depreciation if the asset is eligible and has not been claimed under the temporary full expensing measures or Instant Asset Write-Off measures.
The amount that can be claimed in the year the asset is first used or installed ready for use is:
  • 50% of the cost (or adjustable value where applicable) of the depreciating asset plus
  • the amount of the usual depreciation deduction that would otherwise apply but calculated as if the cost or adjustable value of the asset were reduced by 50%.
For businesses with a turnover of less than $10 million that have chosen to use the simplified depreciation rules, a different method of accelerated deprecation was also available for the assets in their small business pool. However, as these businesses are now required to claim an immediate deduction for the remaining value of these assets, the Backing Business Investment concession for these businesses is no longer relevant.


Instant Asset Write-off

From 1 March 2020, a full write-off can be claimed for eligible assets costing less than $150,000 if first acquired on or after 1 March 2020 and on or before 31 December 2020. The asset must be installed ready for use prior to 30 June 2021. This concession is available for businesses with an aggregated turnover of less than $500 million.
For small business using the simplified small business depreciation method, the instant asset write-off is still available, but for assets acquired from 1 January 2021 it is only available for eligible assets costing less than $1,000.


Cashflow Assistance and Government Grants

There were a number of payments made to businesses and individuals in the 2021 tax year. Many of these may need to be included as income in your tax return. For more information on these payments and the income tax consequences see Coronavirus Assistance for Individuals and Businesses.

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