The ATO has updated PCG 2020/3 (Practical Compliance Guideline) to extend the time frame individual taxpayers can claim the COVID-19 80 cents per hour shortcut method for running expenses associated with a home office.
When PCG 2020/3 was first released, the shortcut method was made available to use from 1 March 2020 until 30 June 2020. The applicable dates are now from 1 March 2020 to 30 September 2020. In summary, a taxpayer can claim a deduction of 80 cents for each hour they work from home due to COVID-19 as long as the individual is:
- working from home to fulfil their employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls; and
- incurring additional deductible running expenses as a result of working from home.
A taxpayer does not have to have a separate or dedicated area of their home set aside for working, such as a private study.
The shortcut method rate covers all deductible running expenses, including:
- Electricity for lighting, cooling or heating and running electronic items used for work (for example your computer), and gas heating expenses.
- The decline in value and repair of capital items, such as home office furniture and furnishings.
- Cleaning expenses.
- Phone costs, including the decline in value of the handset.
- Internet costs.
- Computer consumables, such as printer ink.
- The decline in value of a computer, laptop or similar device.
A taxpayer does not have to incur all of these expenses, but must have incurred additional expenses in some of those categories as a result of working from home due to COVID-19.
If a taxpayer uses the shortcut method to claim a deduction for additional running expenses, they cannot claim a further deduction for any of the expenses listed above.
They must keep a record of the number of hours they have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters.
If a taxpayer uses the shortcut method to claim a deduction in a tax return for either the 2020 or 2021 income years, lodged through myGov or a tax agent, the notation ‘COVID-hourly rate’ needs to be included next to their deduction for home office expenses in their tax return.
To read the full guideline, visit the ATO website.
Please contact our office on (08) 9392 7600 if you would like to speak to one of our specialised tax agents about claiming work from home deductions.