Like many of us, if you have continued to work from home this year, you may be planning to claim different expenses than if you were working in an office. With so many claiming work from home expenses, there a four deductions on the ATO’s watchlist this year that they will be looking at closely:
- Personal expenses such as food and beverages, toilet paper, cleaning costs –these are personal and non-deductible.
- Expenses related to a child’s education, such as online learning courses or laptops.
- Claiming large expenses up-front (instead of claiming depreciation for assets) – the instant asset write-off only applies to businesses and not employees.
- Occupancy expenses such as rent, mortgage interest, property insurance, land tax and rates, which cannot be claimed by employees working from home.
These items are on the watchlist, particularly when the ‘actual’ method to claim deductions is used. You need to keep records and show evidence of expenses incurred especially if you intend to claim 100% of the cost. If you wish to avoid attention from the ATO, ensure you are claiming honestly.
If you use the ‘shortcut’ or ‘standard cents per hour methods, there may be less focus. We have explained the difference between each of these different methods of calculation here.
Using the latter methods doesn’t mean you’re not going to be watched. You will need to show how you have calculated the number of hours you worked from home during the financial year. Below are some examples that might be useful for this purpose:
- Activity log, or
- An employment agreement specifying that you work from home.
The ATO has also mentioned the copying and pasting of deductions from previous years, generally regarding car and travel expenses. If you have continued to work from home, then it may be assumed that car and travel expenses will have decreased in your tax return this year. Now more than ever, it is important to ensure you claim only the expenses incurred and have the records to prove it.
On the flipside, the ATO is cognisant that they may see an increase in other deductions this year, including:
- Clothing and laundry – particularly for medical or frontline workers.
- Personal protective equipment (PPE) or cleaning items like hand sanitiser.
- Depreciating equipment – computer monitors, desks and chairs.
If you have any queries about the four deductions on the ATO’s watchlist this year or calculating your WFH expenses in this year’s return, make sure you read the ATO’s website or contact your Arabon accountant on 1300 ARABON.