COVID-19 tax return shortcut could leave workers out of pocket

How listing your working from home expenses could be BETTER for your tax return – and why claiming a COVID-19 shortcut will cost you money

  • Workers warned COVID-19 shortcut on tax return could lead to smaller rebate
  • Australian Taxation Office announced simplified deduction last month
  • Workers can claim 80 cents for every hour they worked from home since March
  • The shortcut is an alternative to sorting out and claiming individual expenses 

Workers have been warned to expect less money on their tax return if they choose to claim a COVID-19 shortcut over listing individual expenses.  

The Australian Taxation Office announced last month wage earners could claim 80 cents for every hour they worked from home between March and September.

Taxpayers would only need to record the flat hourly rate in the tax return form rather than sift through bundles of receipts and records to claim individual expenses.   

H&R Block’s Mark Chapman warned  the simpler method could actually lead to a much smaller tax return.  

‘The 80 cent shortcut rate is a nice simple calculation, but generally speaking, claiming your actual costs will give you a much bigger deduction,’ he told The Australian Financial Review.

Workers have been warned to expect less money on their tax return if they choose to claim a COVID-19 shortcut over listing individual expenses (stock image)

Taxpayers would only need to record the flat hourly rate in the tax return form rather than sift through bundles of receipts and records to claim individual expenses (stock image)

Taxpayers would only need to record the flat hourly rate in the tax return form rather than sift through bundles of receipts and records to claim individual expenses (stock image)

‘It could be potentially several times larger, depending on the things you claim.’

The ATO brought in the simplified deduction as it prepared for ‘a tax time like no other’.

How Australians working from home can submit tax returns

Since March, Australians working from home have been allowed to claim a flat 80-cent an hour rate

This has been extended until September 30

H&R Block calculated someone working from home stood to be refunded $400 to $450 if they had claimed a flat 80 cent rate since March

A 52 cents an hour with phone, internet, electricity bills claimed would typically yield $850 to $900

Claiming new items worth up to $300 like a desks and office chairs was more likely to net a $1,600 refund

Items worth more than $300 like laptop computers have to be claimed over two years to account for depreciation

Source: H&R Block calculations for someone working from home between March 1 and June 30, 2020

Since March, the tax office has allowed Australians to claim a flat 80 cents-an-hour rate as COVID-19 lockdowns saw many more professionals work from home. 

The beginning of the new financial year on July 1 saw the Australian Taxation Office’s website crash as people rushed to file their returns.  

Within two days, the ATO received a whopping 230,000 tax return applications.

More than 457,000 individual refunds have been completed as of July 14, towering over the 389,000 claims lodged during the same time last year.

Mr Chapman previously said the rush to file tax returns was a sign many people were in trouble.

‘With COVID-19, a lot of people are in a position of financial distress.’

‘They’re potentially looking at bigger refunds than in the past, partly because of the tax offset and partly because of the impact of COVID-19.’ 

More than 10million Australians earning between $37,000 and $126,000 are also entitled to between $255 and $1,080 in low and middle-income tax offsets. 

Almost half, or 4.5million of them earning between $48,000 and $90,000, will be eligible for the full $1,080 benefit.  

That includes those earning an average, full-time salary of $86,237 but not minimum wage earners now on $39,198 a year. 

Treasurer Josh Frydenberg said tax cuts announced in the April 2019 budget would help Australians keep more of what they earned. 

‘A record number of Australians have already lodged their tax return with refunds to land in bank accounts over the course of the week,’ he said.

Though H&R Block's Mark Chapman warned the simpler method could actually lead to a much smaller tax return (stock image)

Though H&R Block’s Mark Chapman warned the simpler method could actually lead to a much smaller tax return (stock image)

What you can and can’t claim on tax while working from home

Expenses you can claim 

If you work from home, you will be able to claim a deduction for the additional expenses you incur. These include: 

  • electricity expenses associated with heating, cooling and lighting 
  • the area from which you are working and running 
  • items you are using for work 
  • cleaning costs for a dedicated work area 
  • phone and internet expenses 
  • computer consumables (for example, printer paper and ink) and stationery 
  • home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the full cost of items up to $300 decline in value for items over $300.   

Expenses you can’t claim

  • If you are working from home, you can’t claim:  
  • the cost of coffee, tea, milk and other general household items your employer may otherwise have provided for you at work
  • costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
  • items that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone
  • time spent not working, such as time spent home schooling your children or your lunch break. 

Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.  

Source: Australian Tax Office  

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