Tax traps to avoid when working from home

TAXING TIMES: With more people continuing to work from home, the ATO is making tax time easier, however you should always visit your accountant to make sure you are using the right method for your situation. Picture: Shutterstock
TAXING TIMES: With more people continuing to work from home, the ATO is making tax time easier, however you should always visit your accountant to make sure you are using the right method for your situation. Picture: Shutterstock

DURING the outbreak of COVID, there was a dramatic spike in people working from home due to lockdowns and social distancing requirements. While many people have started returning to offices across the country, there is still a large workforce who continue to work from home.

Working from home has become attractive for businesses and employees for several reasons, including reducing costs such as office space rental and utilities while also increasing productivity and offering employees a better work-life balance. However, working from home can always have some tax implications. This can include anything from purchasing furniture and equipment for your home office to claiming deductions.

Last year the Australian Taxation Office (ATO) devised an additional claim method to simplify tax returns for people working from home, in addition to providing a tax offset of up to $1080 for low-to-middle income earners. Senior accountant, Brad Evans, said that both systems helped many employees in the last financial year and would be continued again this year.

"In 2020, the shortcut method allowed people to claim a flat rate of 80 cents per work hour for all their expenses incurred while working from home," he said. "It basically meant that for the average worker, it was a quicker and easier process than the actual cost or the fixed-rate methods."

"The shortcut method is available for people working from home again in this financial year, but you must be incurring actual expenses as a result of working from home and fulfilling work duties, and not just completing minimal tasks such as taking quick phone calls or checking emails."

While claiming the 80 cents per work hour might be the quickest way to complete your tax claims, Brad said it might not be the best, depending on your circumstances. "Quite often using the actual cost or fixed rate methods can result in a higher tax return depending on what your costs have been throughout the year. So it is always important to talk to your accountant and decide on the best avenue for yourself," he said.

"The ATO will also be conducting thorough checks and audits on people's working from home claims, so it's important to have your diary records or logbooks, receipts and other paperwork in order."

Elinor Kasapidis, CPA Australia's Senior Manager Tax Policy, agreed and said while you can claim home office expenses as a deduction, there were traps for the unwary. "Not everything that's provided for you at work counts as a deduction when you use it at home, and unfortunately, you're expected to wear the cost of your morning coffee and bikkies," she said.

"Using the short cut method for calculating working from home expenses can save time as it provides a standard deduction of 80 cents per hour. But remember, you need to be able to prove your claim if the ATO asks."

Elinor said that claiming deductions for work expenses was the single most significant area people got wrong when doing their taxes. "It's not just overclaiming either; plenty of people miss out on deductions they're entitled to as well," she said. "That's why we recommend people see a CPA-registered tax agent to help complete your tax return."

For more information on how the individual claim methods work and how they have affected your circumstances, it's best to speak to your accountant or visit ato.gov.au.

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