Whether it comes from necessity or legality, the global COVID-19 pandemic has upended businesses in many industries. Those that have changed tack have weathered the storm. Those that haven’t had likely suffered damage.
One of the greatest shifts we have seen is towards working from home. Social distancing, quarantine lockdowns, and other requirements have for businesses to adjust from traditional office setups and facilitate a remote workforce. Tax accountants all over the country have seen an influx of people wanting to make the most of their tax return now that they work from home.
This shift has come at great cost to businesses who were unprepared for the change. However, with great cost comes great opportunity. Individuals can now claim more on tax if the home is their primary place of business. Here’s how you can make the most of your new working arrangement.
1. Claim running expenses
If you are using part of your home for work-related activities — like a study, office, or even a section of the living room — you can calculate running costs to claim on tax.
Running costs include electricity, water, tech consumables, and the depreciation of office furniture. Here are the three typical methods of calculating running costs:
- The Shortcut Method claims 80 cents per hour for all additional business expenses incurred at home.
- The Fixed Rate Method claims 52 cents per work hour, and work-related portions of expenses and assets.
- The Actual Cost Method takes an accurate, comprehensive costing of all expenses incurred.
Regardless of the method you choose, it’s important to keep meticulous records about the time and money spent on working from home.
2. Claim occupation expenses
Occupation expenses cover the cost of physically occupying your property. These include:
- Rent paid
- Mortgage interest
- Land taxes
- Property insurance
- Council rates
Ordinarily, you cannot claim occupation expenses on tax. However, during the current pandemic, you can claim these expenses for two reasons:
- You can only use your workspace for work purposes.
- Your employer has provided no alternative work location.
If you’re a homeowner, it’s important to understand that working from home will also have implications for Capital Gains Tax (CGT) if you ever want to sell your property. Working from home means that you are using your home to generate income. This means that you cannot claim CGT Main Residence Exemption for the home office or workspace used for work.
3. Claim phone and Internet expenses
In this day and age, Phone and Internet access is important to most jobs. To claim these expenses on tax, keep a detailed record of your phone and Internet use for a 4-week period. This will then be extrapolated for the entire year.
Using the Limited Document Method, you can claim up to a $50 threshold comprised of:
- 75c for every work phone call made on your mobile
- 25c for every work phone call made on your landline
- 10c for every work text message sent from your mobile
The Actual Expense Method requires you to work out the percentage of phone calls and Internet data used in the performance of work, which will be multiplied against your bills.
Preparing your tax return
When preparing to claim work from home expenses, the most important thing to keep up is meticulous record keeping. The more records you have, the more you can claim at tax time. Get into the habit of recording the time and money you spend each week on work-related activities at home. An experienced tax accountant can also help you claim your RD Tax credits and squeeze the most out of your tax return.