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Coronavirus is going to change the way we claim at tax time. Here's what you need to know
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Coronavirus is going to change the way we claim at tax time. Here's what you need to know

Your tax is probably the last thing on your mind right now.

But it's something practical you can control if you're finding life a little bit overwhelming.

If you're working from home because of Covid-19, you've probably realised that there are a few extra expenses to consider.

Perhaps you've rushed out to buy a new desk for your spare room, some stationery or even a new laptop.

And then there's the change to your next round of household bills like power, heating and cooling, as well as internet costs.

While some employers will fork out for equipment, or even pay a daily allowance for bills, most of us will find that the best way to get some money back is by making a claim at tax time.

Let's dig into what you might want to do now to be eligible.

I have no idea what I should be claiming at tax time

It's easy to get confused about this stuff.

Basically, the things you can claim relate directly to the work you do from home.

There are two broad areas where you can claim, says Andrew Gardiner from the National Tax and Accountants' Association.

The first area is running costs. These are things like lighting, heating, cooling and the decline in value of equipment, furniture and fittings you use for work in the home office.

Accountants call this decline in value depreciation.

The second main area for home office-type claims is phone and internet.

OK, so how do I claim running costs?

There are two methods the tax office allows.

The one most people use is where all the expenses are included in a fixed rate of $0.52 per hour worked at home.

Stay with me here — I'll give you an example.

If you worked at home for 10 hours per week for the whole year, it would be calculated as 10 hours times $0.52 times 48 weeks = $249.60.

Keep in mind that figure includes all of your work-related bills such as heating, power and the depreciation on your office equipment.

Mr Gardiner warns that the Australian Tax Office (ATO) examines claims using this method closely.

"So be sure not to overestimate your claim," he said.

"Any employee who indicates they have worked from home for 52 weeks in a year will be greeted with a degree of scepticism given public holidays and annual leave."

Can I claim the whole cost of my new chair though?

Well, it depends on how you've decided to claim your home office expenses.

If you are claiming under the $0.52 per hour approach, the answer is no. It's already included in that fixed rate.

But if you're using actual records, then you can claim those items separately.

If your printer or chair costs $300 or less, you can claim the full cost for the item outright.

But, if it cost more than $300, you claim the depreciation (you can work out the depreciation using this ATO tool). It does get very complicated, so you may just get your accountant to do it.

So what records do I need to keep?

The key proof you need to claim for running expenses using the fixed-rate method is a four-week work diary.

It can be a physical diary or an electronic one, as long as you've got the right information.

"The diary would want to specify the date, the time you commenced work, the work activity, the time you ceased the work activity and where you've got a break in the course of the day you'd have to recognise that as well," Mr Gardiner said.

"We're only talking about the time you're devoting these expenses for your job or employment purposes."

You then use the diary to estimate how many hours you work from home over the entire year.

The other way to claim is complicated and very few taxpayers bother doing it.

It's about keeping records of all your bills and apportioning the percentage of work time vs personal time.

"You need to work out what floor area relates to the home office as a percentage of your total floor area," Mr Gardiner said.

"You've then got to work through the process of the time basis you allocated and therefore extent to which the home is being used for the home office.

"People don't do this because they've got better things to do. It's way too time consuming and mistakes can easily be made."

But if you want to read more, check out the ATO's website.

What about my phone and internet expenses?

They're claimed in a different way.

If your claim comes under $50 you can estimate the number of work calls you make and do a basic calculation to claim.

The rates you use to work out the cost of your work calls are $0.25 for calls made from your landline, $0.75 for calls made from a mobile and $0.10 for text messages.

"Once you've worked that out and determine the figure is less than $50, you can claim $50 without all other record keeping," explained Mr Gardiner.

The other approach is claiming the actual expenses, but you would need to keep a four-week diary documenting the work usage of your phone and internet.

Then you have to calculate the number of work calls as a percentage of all calls, the amount of time spent on work calls and data used. You then apply that to the costs you incur over a year.

What if I'm working from the kitchen table?

These claims assume you have a separate room dedicated as a home office, which many people don't have.

"It needs to be a designated room, so that's the issue for a lot of people," tax accountant Paula Hart said.

In general, if you're working from the kitchen table or the couch, you can't claim any running expenses using the fixed rate.

However, you can claim work-related phone and internet expenses and the decline in value of your computer or office equipment.

Yep, it's confusing.

What if I already worked at home before COVID-19?

If you normally do some days at home but are now working additional hours, you have to keep two records, says Ms Hart.

"What they need to do is keep records for the actual hours worked from home due to the coronavirus situation, and their usual hours they worked — they have to keep two lots of records," she said.

And what if my partner or housemates share the home office?

You can't double dip, says Ms Hart.

"You need to take into account any other members of the household using the home office and apportion the expenses accordingly," she said.

"The whole idea is you can claim deductions for additional costs you're incurring. If you're in the same office, it's the same lights on, for example."

What do I need to do right now?

The key thing to start doing right now is keeping your four-week work diary, says Ms Hart.

"Especially because with the COVID-19 situation there will be lots of varying work hours for people," she said.

And if you ever get audited, you need to be able to produce it to prove the hours you worked.

Being organised is important because it means more money in your pocket at tax time, which most of us need right now.

"When you factor in how many hours people are going to be working from home in light of the stage-two restrictions, claims for home office expenses can accumulate very quickly into a reasonable-sized claim," Mr Gardiner said.

 Original Article by business reporter Emily Stewart for ABC 

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