Like many Aussies, due to the ongoing pandemic you may have found yourself spending a good deal of the 2020 – 2021 tax year working from home (and if you haven’t already, consider buying an ergonomic desk from the Zen Space Desks range of adjustable desks to make working from home that much more comfortable). Most of Australian home workers are looking forward to making some extra deductions this year, and with the upcoming end of financial year just around the corner it is worth keeping in mind what to watch out for as the Australian Tax Office has already started warning taxpayers about making unjustified claims this year.
Who is on the Australian Tax Office’s Radar for Tax Year 2020 – 2021
In late May, ATO has reportedly announced increased scrutiny for tax deduction claims made by home-based workers.
In simple terms, the ATO’s logic is that during the tax year 2020 – 2021 you were either:
- Primarily working from home, and an increase in related claims is to be expected, along with a decrease in travel, vehicle, or clothing expenses at the same time (because you would have been at home most of the time). Or . . .
- You were not primarily working from home and should not incur significantly increased deductible expenses related to doing so, but travel, vehicle and clothing deductions are more easily justified and to be expected in this case.
The Australian Tax Office then is specifically on the lookout for claims of increased deductions related to working from home, and a simultaneous, unchanged from a typical non-pandemic year level of travel, vehicle, and clothing related claims. If your working arrangements have significantly changed during the last financial year, it is crucial that your tax return accurately reflects your actual situation. In other words, do not simply copy and paste your past tax claims or you could find yourself facing fines and penalties. The ATO has stressed that as long as you can evidence your claims, you have nothing to be afraid of.
How to Calculate Your Working from Home Expenses for Tax Year 2020 to 2021
The ATO has published a temporary shortcut method where you can claim a deduction of 80 cents for each hour you worked from home for the period between 1 July 2020 to 30 June 2021 in your 2020 – 21 tax return. If you were working from home to fulfil your employment duties (and not just carrying out incidental, minimal tasks such as occasional checking of e-mails or taking calls) and if you incurred additional running expenses as a result of working from home. It is important to keep records such as timesheets that evidence the hours you have worked. If you want to claim part of an expense of more than $300, such as a height adjustable desk, or other equipment in the future year, you have to keep your receipts too.
What if I Did Not Work from Home
If you work required contact or being within a close proximity of clients or customers, or if you clean premises, you may be able to claim deductions on the cost of personal protective equipment (PPE) such as gloves, face masks, and sanitisers. Typically, this would apply to workers in healthcare, aviation, hair and beauty, retail and hospitality industries who purchased such items for use at work, paid for them out of their own pocket and have not been reimbursed. Here as well, it is important to have records such as receipts to evidence your claims.
In summary, here are the do’s and don’ts
- DO ensure you have substantiating receipts or invoices for any of your home office claims
- DO ensure a diary log of “reasonably arguable” work-related hours from WFH
- DO get proper advice from a qualified tax professional
- DON’T assume you can simply claim the same amounts as per prior year
- DON’T claim for any capital items in excess of $300 as an immediate write – must be depreciated
Working from Home This Tax Year? Are You Taking the Full Advantage of Possible Deductions?
If you’re looking to spend some more money than you could potentially deduct as an expense related to working from home in the financial year 2020 to 2021, browse our range of adjustable desks, adjustable monitor arms and ergonomic chairs and order online now.
General Advice Disclaimer: The advice provided in this article is general in nature and does not take your individual circumstances into account. Seek out professional advice before making any decisions about your tax related matters and affairs.