The impact of COVID-19 has made a lasting impression on the conventional office workplace. Working from home seems to be here to stay for a lot of companies, meaning the process of lodging your tax return may look a little different. You can still lodge your tax return online via myGov, as well as hire a professional tax accountant from the 1st of July to 31st of October 2022. The Australia Tax Office has continued the methods they introduced last year when it comes to claming for working from home, due to Coronavirus.
This article will focus on filing a tax return if you’re an employee and explain:
- The New ‘COVID-19 Hourly Rate’ claims and Shortcut Method
- What you can and cannot claim if you’re working from home due to COVID-19
- How to calculate your running expenses (Fixed Rate and Actual Cost Method)
- What you need for a Tax Return (Whether you’re working at home or not)
- How much does a tax return cost?
- Frequently asked tax-related questions
‘COVID-19 Hourly Rate’ claims & shortcut method
The ATO states that there are now three methods to calculate your running expenses. The third Shortcut Method was introduced to support us working from home due to coronavirus. The three methods include the:
1. Shortcut Method: Claim 80 cents per work hour for all running expenses
2. Fixed Rate Method:
Claim 52 cents per work hour (Lighting, cooling, heating and decline in office furniture)
Work-related portion of your phone and internet expenses, computer and stationery
Worked-related portion of the decline in value for your electronic work devices
3. Actual Cost Method: Claim all your actual work-related portion
What is the Shortcut Method?
The Shortcut Method covers all deductible running expenses, so you don’t need to expense them individually. In order to be eligible to claim for the ATO deduction of 80 cents per hour due to working from home due to COVID-19, you need to:
- Be working from home to fulfil your employment responsibilities and not just occasionally take calls and check your emails.
- Be incurring additional running expenses due to working at home.
Note: Since this method covers all deductible running expenses, you cannot claim further reductions on these expenses.
Records you need to use the shortcut method
Work from home bookkeeping is equally as important if you were to still be working at your workplace. The main records you will need is a record of the number of yours you have worked from home due to COVID-19, as well as receipts of running, phone and internet and home office expenses. Acceptable records for proof of your working hours include timesheets, rosters and diary entries. Remember, you must include the note ‘COVID-Hourly Rate’ in your tax return whether you’re submitting it through myGov or a tax agent.
What you can & cannot claim if you’re working from home
If you predominantly work from home prior to COVID-19, you have always been able to claim tax on expenses such as running, occupancy and phone and internet. Let’s refer to these as working from home expenses.
This year the ATO recognises that many of us are now working from home if possible. The be eligible for claiming tax on working from home expenses, whether it’s one day a week or due to COVID-19, you must keep the following records:
- A diary with at least 4-week representative records detailing your usual pattern of working at home. These can include your timesheets or calendar. The ATO may ask your employer to confirm these details.
- The actual hours you’ve worked from home due to coronavirus
- Receipts or written evidence (e.g. depreciating assets you’ve purchased or entries of small expenses that are $10 or less, and totalling no more than $200)
- Itemised phone accounts and records where you’re able to identify work-related calls
- Your usual arrangements for working at home
Summary of what you can & cannot claim (COVID-19)
If it’s your first time working at home, here’s a list of work from home tax deductions you can claim for. In order to be eligible to claim a deduction, the following must apply:
- Real – You spent the money on this expense.
- Relevant – The expense is directly related to your income to be recognised as an ATO work-related expense.
- Records – Keep records to prove the expense.
What you can claim
- Cleaning Costs for your dedicated workspace
- Computer and Stationery
- Home Office Equipment (such as computers, printers, phones and furniture) which you can either claim up to $300 or decline in value for items over $300
- Phone and Internet Expenses
- Running Expenses (1st of March to at least 30 June 2020) such as electricity for heating, cooling and lighting in your working space
What you cannot claim
- Occupancy Expenses including rent and mortgage rates. If you’re running a business from home, you may be entitled to a partial exemption.
- Coffee, tea and milk, even if your employer has provided them in your workplace
- Children’s education costs
Note: If you’re using this Shortcut Method, you must note ‘COVID-hourly rate’ in your tax return and keep in your records.
How to calculate your running expenses
Using the Shortcut Method is the simplest way to calculate your running expenses, but what if you want to use the old Fixed Rate Method (52 cents) or the Actual Rate Method? Here’s a quick summary of how to make calculations for both methods.
Fixed rate method
- The Fixed Rate Method allows you to claim a fixed rate of 52 cents per work hour.
- You’ll need to have a diary for a representative 4-week period showing your usual working pattern and record the number of hours you’re working at home.
- You will then need to separately calculate the expenses for your phone and internet usage, computer consumables and stationery and any office electronics or furniture that are declining in value. You can use the ATO myDepreciation tool to calculate the declining value of your items.
Actual rate method
- The Actual Rate Method can be used if you have a dedicated workspace.
- Keep a record of the actual hours you have worked from home this financial year.
- Just like the Shortcut and Fixed Rate Method, you will need to have a diary for a representative 4-week period showing your usual working pattern.
- Calculate the decline in appreciating assets with receipts for proof.
- Work out your cleaning expenses by totalling your receipts and multiplying them by the floor area of your workspace.
- Individually calculate your heating, cooling and lighting costs.
- For your home office furniture, you can claim for a deduction that costs $300 or more by calculating the decline of owned assets for the income year and assets used for work-related needs.
How to do your tax return
There are generally two options when submitting a tax claim. You can either do it yourself with the myGov tax return process or hire a tax accountant. It’s recommended to hire a tax agent if you have multiple expenses or just want your tax return to be accurate and correct. Keep reading for a list of records and documents you need for both options.
Option 1: I’m lodging my tax return myself online
- Have your Tax File Number, Income (PAYG Payment Summary) and Expense documents and records ready. Having an ATO Tax Return Checklist can be handy.
- Throughout the financial year, you can use the myDeductions app to keep track of your expenses. This app should only be used by employees, not business owners.
- Sign in to your myGov account. If you don’t have one, sign up here or learn how to create one here. You will need to confirm your identity and make sure that your ATO account is linked to your myGov account.
- The ATO will prefill some information such as your PAYG Payment Summary, bank and superannuation. You can also link other services such as your Centrelink and Medicare. Be sure to check if all the information is correct.
- Follow the prompts adding in your expenses and other records.
- Remember to note ‘COVID-19 Hourly Rate’ if you want to claim tax back on running expenses or home office expenses.
- Submit your online Tax Return Form. The refund can take approximately two weeks to process.
Tip: You can check the status of your tax return on your myGov account and if you made any mistakes, simply click on the ‘Manage tax returns’ button to amend any records.
Option 2: I’d like to hire a Tax Accountant
Sometimes it might be easier to hire a professional to ensure no mistakes are made.
- Have the same documents ready if you were to lodge your tax return yourself. Important documents include your Tax File Number, PAYG Payment Summary and Expense Records and Receipts.
- Find a reliable tax accountant, whether the service is provided in-person or online. If you’re hiring online, be sure to check the business’s reviews and ratings before hiring.
- Once the service is complete, your tax agent should provide you confirmation details and keep you updated on the status of your tax return.
Contact local tax accountants
How much does a Tax Accountant cost?
Hiring a tax accountant is one of the most popular services on Oneflare. Tax return fees can cost approximately $100 to over $1,000 depending on if you’re lodging for just yourself or your business. Find out more about what can affect the cost of your accountant fees on our Tax Accountant Cost Guide.
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Frequently asked questions
Do I need to lodge a tax return?
If you are working or have had government support such as the Higher Education Loan Program (HELP) or Trade Support Loan (TSL). If you are still unsure, contact the ATO or ask an accountant for help.
How do I get a tax file number?
The process for applying for a TFN differs if you’re an Australian citizen or resident or you’re foreign to the country. Generally, you can apply for a TFN at your local post office or online. Find out what process you need to follow on the ATO website.
How long does a tax return take to process?
The ATO states that it can take approximately two weeks if you lodge online and ten weeks to process if you lodge on paper.
How is the ATO supporting Australians?
The ATO is offering support for COVID-19 for businesses, employers, individuals, employees and tax professionals.
My partner and I both work from home, can we both claim expenses under the Shortcut Method?
Yes. For example, if you and your partner both live together, you can both individually claim 80 cents per work hour. The previous ATO requirement that you both need a dedicated work area has been removed. Remember to note ‘COVID-19 Hourly Rate’ in your tax return.
What is the ATO Tax Brackets for 2019-2020?
The tax brackets change slightly every single year and differ for foreign resident tax rates.
Source: ATO
What are the ATO’s Contact Hours?
There are multiple ways to contact the ATO, including in person, on the phone or online chat. If you are contacting the ATO via phone, the hours have been extended to support high volume calls from 8 am to 8 pm (AEST) Monday to Friday, and 10 am to 4 pm (AEST) Saturday and Sunday.
Disclaimer – Due to the ever-changing nature of COVID-19, please check on the ATO website for the most accurate and up-to-date information.