ATO extends work from home shortcut method – here’s what you need to know

Varun Kumar

18 October 2021

The Australian Taxation Office (ATO) have extended the shortcut method for claiming home office deductions to the 2021-22 income year. The method is meant to make it easier for individuals to claim home office expenses.

Following the prolonged lockdown in states across the country, it is expected Australians will continue to work from home more than they were before the pandemic. Moore Australia is pleased to see the ATO is committed to supporting simplicity in tax returns.

Individuals who work from home during the 2021-2022 tax-year can claim a fixed rate of $0.80 per hour worked from home. The shortcut method covers expenses such as phone expenses, internet expenses, depreciation on furniture & equipment and electricity and gas.

How do I claim if I work(ed) from home?
To claim home office deductions using the shortcut method, individuals need to keep a record of the actual hours worked at home e.g. timesheets, rosters or a diary.

Remember, the shortcut method is not compulsory, and individuals can still claim based on actual expenses incurred, however, they would then have to comply with the necessary, and more complex, record keeping requirements. In fact, there are a number of other methods available for claiming work from home deductions, and you may find it more beneficial to use one of the other methods listed below.

Fixed rate
A fixed rate of 52 cents per hour can be claimed for each hour worked from home and represents running expenses. This method is simple and more commonly used as it does not require full substantiation of actual expenses. Employees will need to keep a record of actual hours worked at home or a diary showing the usual pattern of working from home over a four week period (applied across the remainder of the year). For instance, if an employee spent five hours per week for the whole year (48 weeks estimated after excluding public holidays and annual leave), the claim under this method will be: 5 hours per week x $0.52 per hour x 48 weeks = $124.80.

This method covers heating, cooling, lighting, cleaning and the decline in value of furniture.

If using this method, the following can be claimed in addition (if applicable):

Phone and internet expenses
computer consumables and stationery, and
decline in value on computer or other equipment

Employees claiming are required to separately work out their eligible claim for these items (as explained below).

Actual running expenses
To calculate the claim for running costs, as an alternative to the fixed rate method employees can use the actual running expenses method. This method is more complex requiring more detailed records but may result in a larger claim.

To use this method, they will need to work out how much of their household running expenses ‘reasonably’ relate to performing work in the dedicated office. As an example, a reasonable method of apportionment could include working out what floor area relates to the dedicated home office as a percentage of the total floor area of the home. This percentage is applied to actual running costs incurred during the period including electricity etc. Employees will need receipts of expenses and records to prove the claim.

Phone and internet expenses
If employees use phone or internet for work, they can claim a deduction for the work-related percentage of these expenses if they paid for these costs and have records to support their claims. As above, they will need to formulate a reasonable method of apportioning their work percentage of claims, ordinarily done in the form of a logbook demonstrating a usual pattern of work use.

As an alternative, a tax deduction of up to $50 with limited documents can be claimed based on a set rate for work related use of:

25 cents for calls made from a landline
75 cents for calls made from a mobile
10 cents for text messages sent from a mobile.

It should be noted, however, that if your employer re-imburses you for any of these costs, you cannot claim them as a tax deduction.

Moore Australia advisors are skilled and able to assist with personal and professional tax questions of any size. Our client base ranges from individuals to large corporates and with 14 offices across Australia we are always near you. Be sure to contact your local Moore Australia advisor if you would like more information.