Once again the ATO has extended – this time from 30 June 2021 to 30 June 2022 – the application of the “shortcut” rate set out in Practical Compliance Guideline PCG 2020/3 for claiming work-from-home running expenses.
The latest extension means eligible taxpayers can claim additional running expenses incurred between 1 March 2020 and 30 June 2022 at the rate of $0.80 per work hour, provided records are kept of the number of hours worked from home.
Taxpayers eligible to use the shortcut rate are employees and business owners who work from home to fulfil their employment duties or run their business during the relevant income year and, as a result, incur additional running expenses that are deductible under s 8-1 or Div 40 of the ITAA 1997. [LTN 200, 19/10/21]
PCG 2020/3 – What this Guideline is about
1. As a result of COVID-19, a significant number of employees and business owners are working from home and incurring additional running expenses in relation to their income-producing activities. Additional running expenses include lighting, heating, cooling and cleaning costs, electricity for electronic items used for work, the decline in value and repair of home office items such as furniture and furnishings in the area used for work, phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.
2. Law Administration Practice Statement PS LA 2001/6 Verification approaches for home office running expenses and electronic device expenses states that taxpayers can calculate certain of their additional running expenses by using a fixed rate of 52 cents per hour ( current fixed rate per hour ) or by keeping records and written evidence to determine their work-related proportion of actual expenses incurred.
3. The current fixed rate per hour covers home office electricity (lighting and cooling/heating, running electrical items such as a computer), gas (heating), cleaning and the decline in value of home office items such as furniture and furnishings. It does not cover other expenses such as computer consumables, stationery, phone and internet expenses or the decline in value of a computer, laptop or similar device. As such, a record of the hours worked at home along with full written evidence to substantiate those expenses that are not covered by the current fixed rate per hour must still be kept when using this methodology.
4. This Guideline provides a simpler alternative to the approach in PS LA 2001/6 by specifying a fixed rate per hour that covers all of the running expense items referred to in paragraph 1 of this Guideline for taxpayers covered by paragraph 7 of this Guideline. This alternative shortcut rate (described in paragraphs 26 and 27 of this Guideline) is expected to be particularly helpful for taxpayers now working from home because of the COVID-19 emergency.
The shortcut rate
26. The shortcut rate is 80 cents per hour. This rate can be claimed for every hour that is worked at home. The hourly rate covers all additional running expenses, namely:
- electricity (lighting, cooling/heating and electronic items used for work, for example a computer) and gas (heating) expenses
- the decline in value and repair of capital items such as home office furniture and furnishings
- cleaning expenses
- phone expenses including the decline in value of a phone handset
- internet expenses
- computer consumables
- stationery, and
- the decline in value of a computer, laptop or similar device.
27. If a taxpayer uses the shortcut rate to claim a deduction for their additional running expenses, they cannot claim a further deduction for any of the expenses listed at paragraph 26 of this Guideline.
28. If a taxpayer wishes to rely on the shortcut rate to calculate their additional running expenses they will need to keep a record of the hours they have worked at home. This could be in the form of timesheets, rosters, a diary or similar document that sets out the hours worked.
[Tax Month – October 2021 – Previous Tax Month]