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Work from home : what can I deduct?
Author: Wagdi Wafik Andrawis
Have you been directed by your employer to work from home?
Have you been directed by your employer to work from home to limit the spread of COVID-19, or are you running your business from your home office? While working from home has its benefits, there may be extra expenses too, ranging from printing costs to the need for more internet data and perhaps even additional equipment. You may be able to claim a deduction for the additional running costs you incur. The costs you may be able to claim include the work-related portion of any heating, cooling and lighting for the area you’re working from, work-related phone and internet costs, and work-related decline in value of a personally owned computer and associated office equipment. Whether it will be your registered tax agent or you claim these expenses for your income tax through your mygov account personally, you must keep specific records ranging from diary entries to receipts.
If you have a work-issued computer, you cannot claim any decline in value for it, or for any work-issued office equipment such as additional screens, keyboards or mouse. However, if you have purchased your own equipment, such as a telephone, a printer or a computer chair, you can claim the full cost of those items up to $300, or decline in value (depreciation) for items over $300. This is provided you use the purchased equipment purely for work purposes.
The depreciation that can be claimed depends on the effective life of the asset purchased. For example, the effective life of a laptop is currently two years, so if you purchased a laptop for $800 this financial year and it is wholly used for work purposes, you can claim $400 as depreciation in this financial year and $400 in the next financial year. If the laptop (or other work-related equipment) is used both for work and personal purposes, you can only claim a deduction for the work-related portion of the expense. Work-related portions of other running expenses, including computer consumables such as printer paper, ink and various stationery, can generally be deducted outright.
To work out your expenses for heating, cooling, lighting, cleaning and the decline in value of furniture, you can use one of two methods: the fixed rate method or the actual value method. Under the fixed rate method, you keep records of your actual hours spent working at home for the year or keep a diary for a representative four-week period to show your usual pattern of working from home. You can then claim a deduction at a rate of $52 cents for each hour that your work from home. The actual value method is self-explanatory; however, it not only requires the keeping of a diary, but you’ll also need receipts to show the actual amounts spent and will be required to work out the costs based on floor area as well as other factors.
For phone and internet expenses, you can claim up to $50 without having to analyse your bills in detail. The rates you can use to work out the cost of your work calls are 25 cents each for calls made from your landline, 75 cents each for calls made from your mobile or 10 cents each for text messages sent from your mobile. If you would like to claim more than $50, you will need to work out the percentage of work use over a four-week period using a reasonable basis (ie the number of work calls made as a percentage of total calls).
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A novated lease is an arrangement between an employee, the employer and a car lease company. This option does not expose the business to any hassles or financial pressures of owning a car for each employee because the employee is ultimately responsible for the novated lease. Therefore, if they are no longer employed by the business, then the business does not need to worry about an extra car or car loan repayments as the lease stays with the employee.
- Salary sacrifice where payments are deducted from the employees pre-tax income;
- Novated lease as part of the employee's employment benefits may be subject to fringe benefits tax (FBT), giving the purchasing employee tax savings. FBT is also deducted from pre-tax salary;
- Paying from the pre-tax income of the employee means the employee will save as this will effectively reduce the taxable income of the employee;
- Possibly additional reporting requirements for FBT;
If you have any questions, please contact Silver Peacock & Co and talk to one of our accountants and tax specialists by calling us on 1800 983 448 or send us an emil to firstname.lastname@example.org.
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