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Expense vs tax deduction: How to claim 6 common work-from-home costs

Expenses vs tax deductions: Which should you choose for these 6 common work-from-home claims? Source: Getty

The end of the financial year is fast approaching, and with remote work shaking up this year’s taxes, it’s a good time to have a discussion with your employer on the expenses you’ve incurred that they’ll pay for, and which ones you should claim on tax.

Even if your employer hasn’t set up an expense system for staff, financial adviser Helen Baker told Yahoo Finance that employees are still within their rights to have certain expenses reimbursed by your employer, if those expenses were required to carry out your job while working from home.

“For employees, expense reimbursement is always a better option than a tax deduction, as the employer is likely to pay the full cost of a particular expense, that is, you get 100 per cent back,” Baker said.

“A tax deduction, on the other hand, doesn’t mean the employee will get the full expense back. For instance, if you are in the 32.5 per cent tax rate bracket, you will still be paying 67.5 per cent for the cost of the item.”

Here are six common work-from-home expenses, and how to claim them:

1. Phone calls

Expense: Phone calls are necessary for most client-facing roles, and Baker said it might be reasonable for you to request your employer covers the expense.

“This could be by way of a flat ‘disbursement’ fee of, say, $50-100 a month, which is easy for both you and your employer. Or your employer might ask you to provide itemised costs, whereby you will need to show your employer your bills each month with work separated from personal costs.”

Tax deduction: If you choose to claim your bill as a tax deduction, remember to keep a record of all itemised work call costs, and consider which ATO method is most appropriate. 

For example, the ATO’s new shortcut method will allow workers to claim 80 cents per hour for phone, internet, home energy and decline in value of equipment and furniture. You don’t need a dedicated working space to claim this, but this concession ends on 30 June 2020.

You could opt for the ATO’s fixed-rate method, which enables workers to claim 52 cents per hour on work-related running costs, like air conditioning, lighting, cleaning and the wear of office furniture, as well as calculating specific costs for phone, internet, stationery and decline in value of equipment.

Alternatively, the final option is the actual cost method, which means workers can claim the work-related portion of all work-related expenses, which must be recorded and calculated by them.

2. Internet and mobile data

Expense: Again, you could ask your employer to reimburse you for these costs if you can show you had to go on a higher-cost plan to enable you to work from home effectively, Baker said.

Tax deduction: If you haven’t upgraded your plans, Baker said you can still claim a portion of your internet and mobile data costs as a part of the shortcut, fixed-rate or actual cost method.

3. Hardware 

Expense: Some employers like Atlassian and Google chose to pass on a nominal amount to their employees for them to purchase the hardware necessary to work from home. But if you’ve gone out of your way to purchase essential hardware to do your job, and those items won’t be for personal long-term use, you could ask your employer to reimburse this expense.

“Your employer is unlikely to reimburse you for items they deem non-essential or for personal use which may or may not include a second PC monitor, cables for your home printer, printer ink if other family members are also using the printer, or a laptop that you will keep at home.”

Tax deduction: You can claim hardware like laptops as a tax deduction. According to Peter Switzer, you can claim the full cost up to $300 for home office equipment, which includes computers, printers and telephones. For bigger amounts, a depreciation deduction in your tax return is permissible.

4. Furniture

Expense: Many employees were unlikely to have had a home-office setup when they were asked to work from home, which means you may have had to purchase a desk and a chair to make remote working possible.

However, it’s unlikely your employer would reimburse you for this as you’ll likely continue using the furniture when you re-enter the workplace. 

Tax deduction: If you are claiming under the shortcut method, this expense falls under the 80 cents per hour calculation, Baker said.

However, if you are using the actual cost method and the assets cost less than $300, you can get an immediate deduction for the depreciating asset. 

5. Coffee, tea and late-night meals

Expense or tax deduction: Don’t try to claim either, Baker said.

“Your employer provided coffee, tea and milk in the office, and might have covered your takeaway dinners if you had to work late, out of goodwill. 

“While you are working from home, however, your employer is very unlikely to cover this expense, nor can you claim these general household items as a tax deduction.”

“This is because you are presumably at home and are able to cook your meal.”

6. Electricity

Expense: It’s unlikely your employer is going to reimburse you for energy costs, as it will be tough to determine what portion of your bills was incurred for work use, Baker said.

Tax deduction: Heating, cooling and lighting is covered under the shortcut method and fixed-rate method for tax deductions. 

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