Answers to COVID-19
questions and CGT concerns
Answers to COVID-19 work-from-home expense questions and CGT concerns
There are many questions being asked lately about claiming expenses when forced to work from home over the COVID-19 period – plus a lot of concern about any consequent capital gains issues when later selling a property from which people have been coerced to work from during this time.
First of all, the CGT issue is fairly straight forward. The ATO says that in most cases, if you are working from home as an employee, regardless of whether or not you have a separate work area, there will be no CGT implications on any later sale or disposal of the home. This is the case even if you claim home office expenses, using the new “COVID-19 shortcut method” (below).
However, CGT may apply if you are running a business from home and, as a result r you can claim occupancy expenses (like mortgage interest repayments or rates). In this case, you will generally only be entitled to a partial CGT exemption because of using part of your home as a place of a business.
Claiming COVID work-at-home deductions
The ATO says that to claim a deduction for working from home, all of the following must apply:
But remember, you cannot claim a deduction for items provided by your employer, or if you have been reimbursed by the employer for expenses. If there has not been a reimbursement but you have instead received an allowance to cover expenses when working from home, you:
Expenses that can be claimed
If you work from home, you will be able to claim a deduction for additional running expenses incurred, which may include:
The ATO has stated that it accepts that tracking all of these expenses can be challenging for ordinary taxpayers, so has undertaken to accept a temporary simplified method (or “shortcut” method) of calculating additional running expenses for the period starting 1 March 2020 until at least 30 June 2020. More details are below. It says it may extend this method depending on when general work patterns may return to what has until now been accepted as “normal”.
Expenses not within the COVID-19 ambit
If you are only working from home because of the COVID-19 situation, you generally:
Calculating running expenses
There are at present three ways you can choose to calculate additional running expenses:
Under the short cut method, you can claim a deduction of 80 cents for each hour as long as you are:
Note that in this case, you do not have to have a separate or dedicated area of your home set aside for working, such as a private study.
The shortcut method rate is intended to cover deductible running expenses, including:
It should be pointed out that you do not have to incur all of these expenses, but you are likely to have incurred additional expenses in some of those categories as a result of working from home due to COVID-19.
Importantly, if you opt to use the shortcut method to claim a deduction for additional running expenses, you cannot claim a further deduction for any of the expenses listed above. Also, if you use the 80 cents an hour shortcut method to claim a deduction, when we lodge your 2019-20 tax return we will need to include a note in your return stating “COVID-hourly rate”.
For this shortcut method, the ATO will require some form of record of the number of hours you have worked from home as a result of COVID-19. Examples are timesheets, diary notes or rosters. If using the other methods, a record of the number of hours worked from home is also required along with records of expenses.
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