Since we have jumped into a new era of working from home, you now have the ability to claim more tax deduction than you may have in previous years. These deductions can be additional running expenses which include electricity, phone, internet and equipment. With the 2019-2020 tax year experiencing the full brunt of the COVID-19 pandemic, we have found that many of our clients are unsure on what they can claim and are entitled to. Here is our guide on getting the most out of your tax return.
What Can You Claim
Claiming tax deductions doesn’t need to be complicated, although we understand that in this current time it can be confusing. Take a look at what you can claim if you’re an employee working from home.
- Lighting, heating and cooling, cleaning
- The decline in the value of equipment, furniture and furnishings in your current work-from-home workspace
- The cost of repairs to the equipment, furniture and furnishings
- Running expenses like computer consumables (printer, paper, ink) and stationary
- Phone and internet expenses
- Occupancy expenses (in some cases)
3 Ways Your can Calculate Your Claim
If you’re working from home, there are 3 main ways you can calculate your home office space deductions:
- Shortcut Method
- Fixed Rate Method
- Actual Cost Method
This method was only introduced recently to cater for the current COVID-19 era and will only last between the dates of 1 March – 30 September 2020. This method is here to simplify how you deduct your working from home expenses. With this, you can claim 80 cents per hour for each hour you work from home between the dates 1 March – 20 September 2020.
You’re eligible to choose this method if you are working from home to fulfil your employment duties (not just carry out minimal tasks such as occasionally checking emails or taking calls). Also, if you have incurred additional running expenses as a result of working from home.
When using this method, you’re NOT eligible to claim other work from home expenses.
Fixed Rate Method
By utilising this method, you are able to claim 52 cents for each hour you work from home for work related expenses and additional running expenses. To use the fixed rate method you must keep a record of your hours spent working at home for the year or a diary for a representative four-week period to show your usual pattern of working at home.
This is only eligible for those who have a dedicated work area, like a home office and does not cater for expenses, such as your phone, internet, computer consumables and decline value of equipment (these will need to be calculated separately).
Actual Rate Method
The actual rate method is solely based on the receipts for all business related expenses. To calculate this method you must have records of the following work-related expenses:
- Keep record of hours spent from home during the 2019-20 financial year
- Keep a diary of a representative four-weeks period
- Decline value of depreciating assets
- Cost of cleaning expenses (if you have a dedicated work area)
- Heating, cooling and lighting by working out cost per unit of power used, average units used per hour, total annual hours used for work-related purposes.
- Phone and/or internet plan expenses
- Cost of consumable and stationery
How We Can Help
Here at W M Wright & Co, we strive to make the most out of your tax return. If you’re confused about the current tax financial year and how you can optimise your tax return and make the most out of your tax deductions, contact our team.