New Simplified Method for Working From Home Tax Deductions During COVID-19

Due to the COVID-19 outbreak there has been an increase in the number of people working from home, to assist taxpayers the ATO have announced a new Simplified Method for calculating your working from home tax deduction.

To claim a deduction for working from home, all of the following must apply:

• You must have spent the money.
• The expense must be directly related to earning your income.
• You must have a record to prove it.

This means you cannot claim a deduction for items provided by your employer or if you have been reimbursed for the expense.

There are three ways you can choose to calculate your additional running expenses:

Simplified Method

You can claim a deduction of 80 cents per hour you work from home due to COVID-19 between 1 March 2020 and 30 June 2020 as long as you are:

• working from home to fulfil your employment duties (i.e. you are not carrying out only minimal tasks such as occasionally checking emails or taking calls); and
• incurring additional deductible running expenses as a result of working from home

You do not have to have a separate dedicated area of your home set aside for working to claim this.

The shortcut method rate covers all deductible running expenses, including:

• electricity & gas for lighting, cooling or heating and running electronic items used for work
• the decline in value and repair of capital items, such as home office furniture and furnishings
• cleaning expenses
• your phone costs, including the decline in value of the handset
• your internet costs
• computer consumables, such as printer ink
• stationery
• the decline in value of a computer, laptop or similar device.

If you use this method you cannot claim a further deduction for any of the expenses listed above.

You must keep a record such as timesheets, diary notes or rosters to show the number of hours you have worked from home as a result of COVID-19.

If you are working from home only due to COVID-19, you cannot claim:

• occupancy expenses such as mortgage interest, rent and rates
• general consumables your employer may otherwise have provided you with at work, such as coffee, tea, milk, etc.

The ATO will review extending the period as the COVID-19 situation progresses.

Fixed Rate Method

You can claim a deduction for:

• a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture,
• the work-related portion of your actual costs of phone and internet expenses, computer consumables, stationery; and
• the work-related portion of the decline in value of a computer, laptop or similar device.

To claim using this method, keep records of either:

• your actual hours spent working at home for the year
• a diary for a representative four-week period to show your usual pattern of working at home.

You can then apply the four-week representative period across the remainder of the year to determine your full deduction amount. However, if your work pattern changes you will need to create a new record.

You need to separately work out all other work area expenses, such as:

• phone and internet expenses
• computer consumables and stationery
• decline in value on computers or other equipment.

 Actual Cost Method

You can claim the actual work-related portion of all your running expenses if you have a dedicated work area, which you need to calculate on a reasonable basis.

Further information on what is considered reasonable can be found using the following link:

https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/Home-office-expenses/#Actualexp

We are here to help

Trying to think of everything you need to do keep your team and customers safe and healthy right now as well as run your business is tough.

We will continue to keep you informed of all government stimulus and other measures and how they apply to your business and are here at any time of the day to give you advice on your business continuity plans and cashflow.

Please call us on (08) 9316 7000 if there is anything we can do to help you.

If you need us outside of work hours, please call one of our Directors:

Andrew Sullivan on 0407 680 698
Chris Grieve on 0417 967 539
Ashley Dawson on 0438 014 318

We are here for you and together we will all get through this.

We will all come out the other side with more resilience, more compassion and more empathy.  Until we do, please look out for each other.

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Mandatory Code of Conduct for Commercial Rent Relief

The Government has released a mandatory Code of Conduct to impose a set of good faith leasing principles applying to commercial tenancies (including retail, office and industrial) between landlords and tenants, where the tenant is an eligible business for the purposes of the Federal Government’s Jobkeeper program, meaning they have experienced a revenue decrease of at least 30% and have a turnover of less than $50 million.

As part of the latest set of measures to allow the economy to bounce back after the crisis has ended, the provisions are designed to ensure tenants can emerge at the other side of the crisis still in their premises. The new proposals will include the following:

• landlords not being able to terminate leases or draw on their tenants’ security,
• tenants honouring their leases, and
• landlords reducing rent proportionate to the trading reduction of the tenant’s business.

This can take the form of rent waivers and rent deferrals, in proportion to the reduction in business revenue and up to 100% of the amount ordinarily payable. At a minimum, at least 50% of the rent reduction must be provided as rent free/rent waiver, and the portion that is a deferral of rent must be recovered over the balance of the lease term, but for no less than 24 months.

For example, if your turnover drops by 60%, your rent ordinarily payable would reduce by 60%. This would then be split with half of the rent reduction as rent free/rent waiver, and the remaining half rent reduction as rent deferral.

You can access the full National Cabinet Mandatory Code of Conduct here

Care should be taken to ensure that any repayment of the deferred rent does not compromise the ability of the affected SME tenant to recover from the crisis. If you are either a commercial landlord or tenant impacted by this, please contact one of our Team on (08) 9316 7000 to discuss your options.

We are here to help

Trying to think of everything you need to do keep your team and customers safe and healthy right now as well as run your business is tough.

We will continue to keep you informed of all government stimulus and other measures and how they apply to your business and are here at any time of the day to give you advice on your business continuity plans and cashflow.

Please call us on (08) 9316 7000 if there is anything we can do to help you.

If you need us outside of work hours, please call one of our Directors:

Andrew Sullivan on 0407 680 698
Chris Grieve on 0417 967 539
Ashley Dawson on 0438 014 318

We are here for you and together we will all get through this.

We will all come out the other side with more resilience, more compassion and more empathy.  Until we do, please look out for each other.

• Twitter
• Facebook