Do your homework when working from home
Technology-driven changes to the employment market are seeing record numbers of Australians claiming deductions for expenses incurred while working from home.
But a high level of mistakes, errors and questionable claims has prompted the Australian Taxation Office (ATO) to increase attention, scrutiny and education for home office expenses this tax time.
Assistant Commissioner Kath Anderson said that last year, 6.7 million taxpayers claimed a record $7.9 billion in deductions for ‘other work-related expenses’ which includes expenses related to working from home.
“There is a rising trend of employees working from home, and while extra costs related to working from home are usually deductible, we are seeing some taxpayers either over-claiming or claiming private costs,” she said.
“There is mounting evidence that many taxpayers don’t know what they can and cannot claim. In particular, we are seeing some taxpayers claiming expenses they never paid for, expenses their employer reimbursed, private expenses and expenses with no supporting records,” Ms Anderson said.
Taxpayers can legitimately claim additional costs incurred as a direct result of working from home, but need to be careful not to claim private expenses as well.
“One of the biggest issues we are seeing is people claiming the entire amount of expenses like their internet or mobile phone, not just the extra bit related to work. In reality, the rest of us are subsidising their private phone calls and internet usage, which is not okay,” she said.
According to Ms Anderson, the additional costs of running expenses like electricity for heating, cooling and lighting are deductible, but you need to be able to demonstrate that there were additional costs.
While employees can claim additional running costs associated with working from home, occupancy costs are limited.
“Employees cannot generally claim occupancy-related expenses like rent, mortgage repayments, property insurance, land taxes and rates,” Ms Anderson said.
“Taxpayers claiming working from home expenses should remember that we might contact their employer to confirm their claim. Sometimes we discover that the employer paid the costs, either upfront or through reimbursement, while other times we discover there was no need for the employee to work from home at all.”
According to Ms Anderson, record-keeping is a key focus area for the ATO this year.
“To claim working from home expenses, taxpayers must keep supporting records such as receipts, diary entries and itemised phone bills or other records.,” she said.
While technology is allowing more and more employees to work from home, it is also allowing the ATO to deploy sophisticated systems and analytics to spot claims that don’t add up and claims that are out of the ordinary compared to others in similar occupations earning similar income.
Ms Anderson said there are three golden rules for taxpayers to follow to get working from home claims right. “One – you must have spent the money yourself and not been reimbursed, two – the claim must be directly related to earning your income, and three – you need a record to prove it.”