Home office claims can be complex

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Chartered accountant Gail Freeman guides Brigitte through her complex home-office tax claims. This is a sponsored post.

Brigitte rang to discuss her home-office tax claim for working at home during COVID-19.

Gail Freeman of Gail Freeman & Co.

She said she understood that she could claim 80 cents an hour for the last financial year and wanted to claim it for the whole year as she had worked from home all year.

“As you might guess Brigitte, it’s not that simple,” I told her.

“For the 2020 financial year there are two rates that apply for claiming home-office costs.

“For any employees directed to work from home, the rate that applies from March 1 is 80 cents an hour to cover all home office running costs. Prior to that the rate is 52 cents per hour but you can also claim all of your additional costs.

“You don’t have to use these rates. You can choose to calculate your actual electricity and gas usage and then apportion those costs based on the floor area of the house and then the actual usage of that area remembering that if you have some form of central heating that apportionment is required over a 24-hour period.

“In addition, you can claim for depreciation on the items that you use including computers and furniture, cleaning and phone costs, which I will explain in more detail, internet costs, computer consumables and any other expenses that you incur relating to your work.

“You need to keep a diary of your home-office use. The best way of doing this is to record the hours worked and the work you performed in either your electronic diary or your paper diary for a typical month in the year this is then extrapolated across the year.

“Claiming phone costs is also complex. You need to calculate the exact percentage of work use. The best way of doing this is to keep a record of your work calls as a percentage of total calls for one month and apply this across the year. You need to do this every year.

“It can be difficult to calculate when you bundle your phone and data or when you get a lot of calls included in the plan at no charge. However, a percentage can always be worked out. The Australian Taxation Office provides a methodology for making these claims in one of the documents on its website.

“So even if your costs are bundled you can still calculate the percentage for both phone and internet.”

Brigitte said “that sounds complicated”.

I said: “We do it regularly, so provided you have the invoices and have recorded your hours and calls, it’s not too bad.

“I should add that if you can’t provide a diary your costs are limited to $50 for the year to cover both phone and internet.

“I generally find that 52 cents an hour covers my clients’ costs. However, the 80 cents-an-hour rate is different; it covers all costs, so if you choose to use it you cannot claim for the phone, the computer or the other costs I referred.

“If you don’t have too many other costs, 80 cents an hour is probably fine, but when I have calculated it, if you have additional costs, you are better to claim 52 cents an hour plus the additional costs.”

If you need guidance on any tax claims contact the friendly team at Gail Freeman & Co Pty Ltd on 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer: This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser.


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