After enduring most of 2020 in a remote working set up, many Australians will now be eligible to claim a raft of associated tax deductions as part of their FY20 return. To streamline this process, the Australian Taxation Office (ATO) has updated its eligibility criteria for FY20. Here is what you and your teams need to know to navigate tax time with ease.
FY20 Claims: Changes to Work-Related Deductions
To make it simpler for taxpayers to claim working from home deductions, the ATO has introduced a temporary shortcut method to sit alongside its typical fixed rate and actual cost methods. Taxpayers can now use any one of these three methods to calculate additional running expenses for the period 1 March – 30 June, 2020 inclusive*:
Shortcut Method: claim a rate of 80 cents per work hour for all additional running expenses (vs calculating specific running expenses). If you use the Shortcut Method, you can make no other claims in relation to working from home.
Fixed Rate Method: claim a tax deduction at the rate of 52 cents per work hour for lighting, cleaning, heating, cooling, and depreciation of office furniture. The same rate can be claimed on stationery, a work-related component of phone and internet expenses, computer consumables, the depreciation of a laptop, computer, or similar device/s. If you use the Fixed Rate Method, you can also make separate claims for the work-related proportion of items
Actual Cost Method: claim the actual work-related component of all your running expenses, calculated on a ‘reasonable basis’. The Actual Cost Method requires you to keep all relevant receipts.
The Golden (work-related) Claim Rules
No matter your circumstance or preferred method of calculation, the following rules apply:
- the claim must relate directly to earning income
- you must have a record to substantiate the claim. Taxpayers need to record the number of hours worked from home (such as a diary or timesheet)
- you must have spent the money yourself and not have been reimbursed
- you can’t claim a deduction for items supplied by your employer
- if you have not been reimbursed by your employer, but received an allowance to cover your working from home expenses, you:
- must include the allowance as income in your tax return
- can claim a deduction for the expenses incurred.
For further information relating to expenses you can and can’t claim, records and calculation methods, visit the ATO website or speak to your financial or tax advisor.
*For claims relating to expenses prior to 1 March 2020, the pre-existing methods and requirements apply.
Increases to Instant Asset Write-Offs:
For business owners and sole traders, the instant write-off threshold has been increased from $30,000 to $150,000 per asset. This write-off threshold can now be accessed by businesses with aggregated annual turnover <$500 million.
For individuals, the instant asset write-off threshold is $300. If eligible, this means individuals can claim an immediate deduction for the business portion of a new or second-hand asset first used/installed ready for use from 1 July-31 December 2020 in their FY21 tax return. Further information about Instant Asset Write-Off eligibility is available here and be sure to speak to your financial or tax advisor.