An established and expanded tax “shortcut” will be completed to help Australians working from home during the pandemic present their returns.
This fiscal season will be the last time taxpayers will be able to claim a flat rate of 80 cents per hour worked from the home office.
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Instead, options for claiming expenses will be reduced to two methods: a flat rate method and a real cost method.
The 80-cent shortcut method allowed people to claim a flat rate for all their operating expenses, rather than needing to calculate specific costs.
A shortcut will be completed to claim work expenses from home. Credit: AAP
As of June 30, the fixed rate method drops to 52 cents per hour worked, and does not include expenses incurred by the 80-cent method, such as cell phone use, Internet at home, or amortization of home offices.
Alternatively, taxpayers working from home can use the real cost method.
This means that they should keep records, such as receipts or written evidence, showing the amount they spend on expenses, the expense in amortizing assets used while working from home, and work-related use for expenses and amortization of assets.
H&R Block tax communications director Mark Chapman told 7NEWS.com.au that the timing of the abolition of the 80-cent method was unusual, as many people still work from home.
“Look, it’s probably a natural progression,” he said.
“I would probably wonder if now is the right time because there are still a lot of people working from home.
“There are still people who work from home full time, or are doing a day or two from home, so in that sense, the 80-cent method could be very helpful.”
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He says, however, that one of the benefits of eliminating the 80-cent method means taxpayers have less work to compare and figure out which scheme provides the most profitability.
“Having three different methods was really tricky because taxpayers really had to resolve their claim using all three methods and then compare which was the best,” he said.
Chapman says the actual cost method can provide a big deduction, but it’s also a lot of work.
“It’s where you simply claim your actual costs, you know, your heating bills, your cleaning, your amortization, repairs, and so on.
“The downside to this is that it’s pretty cumbersome when it comes to record keeping.
“You must keep all your receipts and keep a journal for four weeks to determine work versus personal use.
“But still, this method is still available and usually produces a fairly large deduction. Against that, you have to look at the very cumbersome record-keeping requirements, which a lot of people discover.”
The common mistake of people
The ATO has warned that it would repress a common mistake people make when they claim labor costs: a double dip.
This is when someone, unwittingly or not, claims the same expense twice.
ATO Deputy Commissioner Tim Loh said it was important for people to claim what they were entitled to: “no more, no less.”
“Around 8.4 million Australians claimed around $ 19.8 billion in work-related expenses in 2021. That’s a lot of deductions, so we want to make sure you do it right the first time,” he said.
“While some people make genuine mistakes, we see people trying to get an unfair advantage by claiming incorrect or false expenses. One mistake we often see in tax returns is that people claim expenses twice.”
A work trend that became more common during the pandemic is in the spotlight of the ATO. Credit: Getty Images
“Don’t shrink your chip, so don’t double the deductions,” Loh said.
“Remember that we use sophisticated data analytics to monitor incorrect information and run the risk of being audited or penalized for deliberately providing incorrect information.”
For example, when people use the shortcut method, they can also claim the expenses it includes separately.
“When people prepare their tax return, it’s important to remember the rules for claiming different types of work-related expenses,” the ATO says.
“What can be claimed depends on the type of work, the individual circumstances and whether there are the necessary records to support the claim.”