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Work from Home Shortcut Claim Extended

As advised by the Australian Bookkeepers Network – Sprout’s Industry Body.

Good news for bookkeepers (or your clients) who are working from home.

The practical compliance guideline PCG 2020/3 (providing a shortcut method for calculating work from home deductions) has now been extended to 30 June 2021.

The guideline covers working from home and incurring additional running expenses in relation to your income-producing activities during the COVID-19 pandemic. Originally introduced in April 2020, the guideline was first due to expire on 30 June 2020 (which was then extended to September 2020…and then to the end of December 2020). Interestingly, unlike previous extensions, the PCG no longer states whether further consideration will be given to extend the latest end date.

The shortcut method contained in the PCG provides a rate of 80 cents per hour for running expenses and only requires taxpayers to keep a record of the number of hours worked from home. This could be in the form of timesheets, rosters, a diary or similar document that sets out the dates and hours worked. A notation stating “COVID-hourly rate” will need to be placed next to your deduction for home office expenses in the 2019/20 and 2020-21 return.

All told, the PCG now applies from 1 March 2020 to 30 June 2021. Taxpayers eligible to use this new shortcut method are employees and business owners who:

  • work from home to fulfil their employment duties or to run their business during the period from 1 March 2020 to 30 June 2021 and
  • incur additional running expenses that are deductible under s 8-1 or Div. 40 of the ITAA 1997.

Running expenses include: electricity, gas, computer consumable such as printer ink, cleaning expenses, telephone, internet, depreciation on computers and other equipment (e.g. chairs, desks, filing cabinets).

Taxpayers who use this method, cannot claim any other expenses for working from home for that period.

Example

Jay is an employee who is working from home as a result of COVID-19. He purchases a computer on 5 April 2021 for $900. He marks in his diary when he commences and finishes work each day and also the length on any breaks he takes. All told, from his records he calculates that he worked 355 hours through to 30 June 2021.

Provided he retains his diary entries and receipt for the computer purchase, Jay’s 2020-21 deduction under the new shortcut method is $284 (355 hours x 80 cents).

Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method, and must use the pre-existing methods as follows:

Method 2 – the fixed rate method. Under this method, you claim all of the following:

  • a rate of 52 cents per work hour to cover heating, cooling, lighting, cleaning and depreciation of office furniture;
  • the work-related portion of your actual phone and internet expenses, computer consumables, stationery, etc.;
  • the work-related portion of depreciation on a computer, laptop or similar device.

Method 3 – the actual cost method. Under this method, you claim the actual work-related portion of all your running expenses, which need to be calculated on a reasonable basis.

The methods are not mutually exclusive across the financial year. Indeed, it may be the case that you use more than one method during 2019-20 and 2020-21. For example, you could choose methods 2 or 3 for the period July 2020 through to February 2021, and then choose the shortcut method for the period from March through to the end of June 2021.