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Working from home tax deductions 1

What Can I Claim on Tax? A Guide to Working From Home Tax Deductions

It’s that time of year again where we all ask each other ‘What can I claim on tax?’ and sheepishly shrug our shoulders. But this year, much like 2020, we’ve got a good excuse. With many Aussies still yet to make their way back to the office and working from home well and truly in effect, filing your tax return isn’t as straightforward as it once was. But it’s not all bad news. Filing your working from home tax return might see you wind up with a bit of extra cash in your pocket.

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“Depending on your circumstances, figuring out your expenses can be a complicated process – but luckily the ATO has implemented a shortcut method to cover the period from 1 March 2020 to 30  June 2021,” H&R Block CEO Brodie Dixon tells Man of Many. “During this time you claim a deduction for $0.80 per hour of documented work, and this covers all deductible running expenses. But note that, if you use this method, you cannot claim any other expenses for working from home for that period.”

You hear that? Get those receipts out, it’s time to start claiming.

What Can I Claim if I Work From Home?

What you can and can’t claim has always been a bit of a mystery to Aussies, however, in a year as disrupted as this, the confusion is compounded. We got Dixon to spell out the key things you should be aware of this End of Financial Year, including the lesser-known costs you should be claiming. According to H&R Block CEO, there is a wide range of expenses you can claim when working from home, including:

  • Heating, cooling, lighting and cleaning of the area you are working in
  • Phone and internet services
  • Consumables such as printer ink, stationery or paper
  • Home equipment such as a printer, chair, desk, screen or computer – for these items, you can either claim the full cost (up to $300) or the decline in value (items over $300)

Changes to Tax in 2021

Over the last few years, the ATO has made a number of changes to the way we complete our tax returns. With the confines of work becoming more and more blurred, getting a handle on the updates isn’t easy. “The key personal tax change was the extension of the Low and Middle Income Tax Offset for another year, to 30 June 2022,” Dixon said. “This measure ensures that 10.2 million low and middle-income Australians will not see a tax hike of up to $1,080 next year. Also welcome are a couple of the business tax measures. The extension of full expensing and the loss carry-back have been extended for a further year, to 30 June 2023.”

Working from home tax deductions

How Do I Make a Claim?

While you may think you know what you’re doing, even the way that we make a claim has changed this year, Dixon explains. “You can claim the ATO’s existing flat-rate allowance for working from home of 52 cents per hour. This covers the extra costs of heating, cooling, lighting and the decline in value of furniture. All you need to do to claim this is to keep a diary – note the time you start work each day, the time you finish work each day and any breaks. You can then claim 52 cents per hour for each working hour,” he says.

In addition, (and this is what makes this rate different to the temporary 80 cent rate) you can also make separate claims for the work-related proportion of items such as your home internet, mobile phone costs and other expenses that directly relate to your work such as stationery and printer ink. According to Dixon, these additional costs often make this a preferred method since the size of the claim is often much larger than using the 80 cent rate.

“The best way to maximise your return is by maximising your deductions,” Dixon explains. “The first step towards this is understanding your occupation-specific deductions. If you work from home, there are also a range of working from home expenses you can claim whether you work from home full time or part time.

A further option is to claim the actual work-related portion of all your running expenses, which you will need to calculate on a reasonable basis. This is a considerably more labour intensive process and requires careful documentation of all expenses, but it will often produce a bigger claim and is best calculated with help from your tax agent.

How to Maximise Your Claim

We hear it often, but just what does maximising your tax claim actually look like? According to Dixon, there are a number of small steps you can take to improve your financial standing, making it easier to generate greater returns when it comes time to file your forms.

“Managing your personal cash flow is one of the first steps towards ‘financial freedom’. The better you understand your financial position, the more likely you are to make better decisions to allow your hard-earned money work even harder for you,” he says. “By offering Aussies transparency and allowing them to see all bank accounts and cards in the one platform, with some smart tools, they can get a better handle on their spending and budgeting, helping to reduce debt and increase savings. They can also identify transactions that may be tax deductible, and share these with their Tax Agent, ensuring they get the maximum refund possible at tax time.”

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Is There Anything I Can’t Claim?

Take it from us, the last thing you want is the ATO auditors knocking at your door, so it pays to know what you can’t claim as well. Unsurprisingly, you can’t claim for the cost of tea, coffee, milk and other household items your employer might have paid for at work. You also can’t claim costs associated with home-schooling your children, like buying them iPads and desks.

It bears reminding, however, that people who run a business from home may lose part of the Capital Gains Tax exemption on their home for the part of the home that is used in their business. According to the H&R Block tax specialist, here is a list of everything you can’t claim this financial year;

  • Household items
  • Costs associated with home-schooling
  • Occupancy costs – Mortgage interest, rates, home insurance

Common Claim Mistakes

With that in mind, it’s easy to fall into the same traps. Here are the common mistakes Aussies make when trying to claim their tax

  • Failing to claim what they’re entitled to – You’re entitled to claim a deduction for any expense which you incurred in earning your income. So, if you have incurred a work-related expense, and you have the paperwork to prove it, don’t hesitate to claim it.
  • Embellishing deductions – You can only claim what you’ve spent. So, don’t inflate deductions in order to get a bigger refund and only claim for costs you can prove you spent, by producing an invoice, receipt or bank statement for instance. If your deduction claims are found to be incorrect, you will be required to repay the tax avoided, plus pay interest of about 9% per annum. If the ATO believes that you have acted carelessly, a penalty between 25% and 95% of the tax avoided may also be charged.
  • Relying on pre-filled data from the ATO – These days, with the push of a button, you can pre-fill lots of your income information straight from the ATO’s systems. Take care though and don’t assume that income data is correct or complete. Always use your own information (payment summaries, etc) as the key source data. Some people assume that because the data comes from the ATO, it must be right. That’s a dangerous assumption. If you omit income and get questioned by the ATO, the legal burden will be on you, even though you’ve taken the information straight from the ATO’s pre-filled data.

The good news for those looking to avoid a tricky ATO situation is that help is available. In addition to its general tax advice, H&R Block has also introduced MoneyHub. The new easy-to-use financial management platform and credit reporting service allows clients to check their credit score, obtain a comprehensive credit report, access exclusive partner offers and monitor their income, spending and saving habits via the inbuilt Spend Tracker.

“What sets our platform apart and the feature we’re most excited about is the ability to identify and tag transactions that may be tax-deductible,” Dixon says. “Users will then be able to download the full list at the end of the year and share these with their Tax Agent. Make the most out of these features to ensure you get the maximum refund possible at tax time.”

If you want to get your tax sorted this year, it pays to hit the professional. Check out H&R Block’s website for more information.

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General FAQs

What can I claim on my 2021 tax return?

This year, due to the ongoing COVID-19 restrictions, you may be in for a more sizable tax return. If you worked from home, you can claim heating, cooling and lighting bills, the costs of cleaning your home working area, depreciation of home office furniture and fittings, depreciation of office equipment and computers, costs of repairing home office equipment, furniture and furnishings, small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately, computer consumables like printer ink and stationery, phone -mobile and/or landline and internet expenses.

Can I get more tax back if I worked from home?

Yes, you can definitely get more back this year if you worked from home. You should be able to claim expenses related to your WFH conditions that would regularly be covered by your employer.

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