We're halfway into 2020, which means it's time to start thinking about your tax return.
And if you've been working from home, you might be wondering which expenses you can claim.
This year, there are three different ways to calculate your deductions, and choosing the right one will save you money.
We spoke to two accountants to break down the pros and cons, and help you prepare for tax time.
The shortcut method for home expenses
In April, the tax office announced a new method for claiming expenses for working from home due to the coronavirus pandemic.
Using this "shortcut" method, you can claim a tax deduction of 80 cents for each hour worked from home between March 1 and June 30.
That 80 cents covers running expenses (like electricity and gas), phone and internet expenses and everything else.
Who is it good for?
The shortcut method is especially useful for people who are working from shared spaces in their home, like the living room or kitchen table.
Before this new method was announced, you generally needed a dedicated workspace like a home office to claim running costs like heating and cooling.
John Jeffreys is a tax counsel with Tax and Super Australia, a not-for-profit industry group for accountants.
The benefit of the shortcut method, he says, is that you can claim the deduction regardless of where you're working.
What are the drawbacks?
The shortcut method can only be used for hours worked from home from March 1, 2020. If you were working from home before that date, you will need to use one of the other methods to claim for your hours before then.
Another important point is that if you use this method, you cannot claim any other expenses for working from home.
If you have large phone or internet expenses, or if you have spent money to purchase new equipment or furniture, you might be eligible for a larger deduction using one of the other methods.
The fixed rate method for home expenses
The fixed rate method involves claiming a flat deduction of 52 cents per hour worked from home to cover electricity and gas, decline in value of furniture and furnishings and any repairs.
To use the fixed rate method, you will need to have used a dedicated work area. It could be a home office, a converted bedroom or a shed: the key is that you only use it for work.
On top of the 52 cents per hour flat rate, you can claim the following expenses separately:
Phone and internet expenses related to your work;
Decline in value of equipment, such as phones, computers and laptops (but not furniture); and
Stationery and computer consumables, like paper and ink cartridges.
You'll need to keep good records for these expenses, like receipts and bills, and you'll have to allocate the amount of these items that are actually related to your work.
You can't simply claim your whole internet bill as a work expense if you also use it to watch streaming video, for instance.
It's a common mistake that people make at tax time, says Elizabeth Bodycott, chief executive of an accounting and financial advice firm in Sydney.
"An example would be a family with four children. If everyone is at home, it would be hard to argue that the deduction for the internet usage, for one individual, is 90 per cent," she says.
Who is it good for?
The fixed rate method could lead to a higher deduction than the shortcut method, especially if you have bought new equipment during the financial year or have high phone or internet expenses.
It's relatively simple to use and requires less paperwork than the actual cost method (which we'll get to). You can also use the fixed rate method for hours worked from home before March 1.
What are the drawbacks?
The main drawback is that you need a dedicated workspace to claim running costs under the fixed rate method.
If you don't have this space in your home, you're stuck with the shortcut method.
Also, if you have high running costs for your home workspace — or if you have spent money on new work furniture, like a desk or chair for your home office — you may end up with a better result using the actual cost method.
The actual cost method
The third option is to claim the actual expenses you directly incur from working from home.
It takes the most time and can be quite involved. Here are the kind of things you'd be doing:
"You'd break everything down. With electricity, you'd look at the cost of power per kilowatt and number of hours the equipment is used," Ms Bodycott says.
"Then you'd go through your telephone and internet account for a four-week period, and highlight the business portions to determine the work-related percentage for the year.
"Then you'd consider decline in value for furniture and equipment and hold receipts for other expenses like stationery."
Who is it good for?
The actual cost method is going to be best for people who have a lot of expenses and already keep meticulous records.
That said, the actual cost method can often lead to larger deductions for people with significant expenses.
"The 80 cents method is nice because it's easy to operate," Mr Jeffreys says.
What are the drawbacks?
You need to keep good records, allocate your expenses and calculate your deductions. And for some people, the time required may be impractical.
It can be tricky, so if you're not sure what you can claim, or if you simply want some help, you can seek the advice of a tax agent.
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