With end of financial year just a couple of weeks away and employees slowly returning to offices, a financial advisor says that June is a good time for employees to discuss the reimbursement of at-home expenses with their bosses.
Licensed financial advisor and money.com.au spokesperson Helen Baker says: “As the pandemic and consequent shutdowns shocked the private sector, most businesses found themselves scrambling to transition employees to home-based work while maintaining productivity. As such, I believe many businesses have not yet set up a process for reimbursable at-home expenses with their staff. However, employees may have a right to have certain expenses reimbursed by their employer if those expenses were required to carry out their job, and had to be purchased by the employee to work from home.
“For employees, expense reimbursement is always a better option than a tax deduction, as the employer is likely to pay the full cost of a particular expense, that is, you get 100 per cent back. A tax deduction, on the other hand, doesn’t mean the employee will get the full expense back. For instance, if you are in the 32.5 per cent tax rate bracket, you will still be paying 67.5 per cent for the cost of the item.
“Some employers will be very lenient. Others might want to retain ownership of some items they reimburse you for, such as PCs or other high-cost hardware. Check with your employer before deciding whether you would like the item reimbursed.”
The Australian Tax Office has outlined that employees can claim their at-home work expenses in one of three ways. The new shortcut method allows workers to claim 80 cents per hour for phone, internet, home energy and decline in value of equipment and furniture. You don’t need to have a dedicated working space to claim this, however the ATO has only granted this concession for the period from 1 March 2020 through to 30 June 2020.[1] Alternatively, the fixed-rate method enables individuals to claim 52 cents per hour on work-related running costs, such as air conditioning, lighting, cleaning and the wear of office furniture, pluscalculating specific costs for phone, internet, stationery and decline in value of equipment. The final option is the actual cost method, which enables workers to claim the work-related portion of all work-related expenses, which must be recorded and calculated by them.
Helen outlines how to claim on 9 common at-home work expenses:
- Phone calls. If your role is client facing and requires lots of phone use to enable you to do your job, it may be reasonable for you to request that your employer covers this expense. This could be by way of a flat ‘disbursement’ fee of, say, $50-100 a month, which is easy for both you and your employer. Or your employer might ask you to provide itemised costs, whereby you will need to show your employer your bills each month with work separated from personal costs. If, instead, you are claiming calls as a tax deduction, consider if the actual cost method is most appropriate for you. You must also keep a record of itemised work call costs. For those only using their phone for work occasionally, the shortcut or fixed-rate method for claiming a tax deduction may be more appropriate for you.
- Internet and mobile data. You could ask your employer to reimburse you for these costs if you can show that you had to go on a higher-cost plan to enable you to work from home effectively. It may be reasonable for the company to pay the difference between the two plans. If you have not upgraded your plans, you can still claim a portion of your internet and mobile data costs as a part of the shortcut, fixed-rate or actual cost method.
- Hardware such as laptop, cables and mouse, and stationery. If you were required to purchase essential hardware to carry out your job at home – and those items will not be for personal long-term use – ask your employer if they will reimburse you for the expense. Your employer is unlikely to reimburse you for items they deem non-essential or for personal use which may or may not include a second PC monitor, cables for your home printer, printer ink if other family members are also using the printer, or a laptop that you will keep at home. Your unused ink can also be sold to Sell Toner for extra cash. Speak to your accountant about the best way to make this tax deduction.
- Software subscriptions. If you had to purchase software for a work-owned computer or laptop, ask your employer to reimburse you. Similarly, if the software was installed on a home computer for the sole purpose of work, you could request reimbursement. However, if you already had the program installed on your home computer and the license expired, you may only be able to claim a portion of the expense as a tax deduction, as you are likely to continue using the software for personal use.
- Furniture. Many employees were unlikely to have had a home-office setup when they were asked to work from home. If this was you, you might have had to purchase a desk and chair. Your employer may not reimburse you for these as it is likely you will continue using the furniture at home when you re-enter the workplace, so your alternative is to claim as a tax deduction. If you are claiming under the shortcut method, this expense falls under the 80 cents per hour calculation. However, if you are using the actual cost method and the assets cost less than $300, you can get an immediate deduction for the depreciating asset. While cleaning products are also an essential in a home office these are included in the shortcut and fixed-rate methods.
- Coffee, tea and late-night meals. Your employer provided coffee, tea and milk in the office, and might have covered your takeaway dinners if you had to work late, out of goodwill. While you are working from home, however, your employer is very unlikely to cover this expense, nor can you claim these general household items as a tax deduction. This is because you are presumably at home and are able to cook your meal.
- Electricity. Heating, cooling and lighting is covered under the shortcut method and fixed-rate method for tax deductions. Your employer is unlikely to agree to a reimbursement, as it is difficult to determine what proportion of your bills was incurred for work use, particularly if there are multiple people in your household.
- Travel and parking costs to source home-office items. Your employer may not cover these costs. Travel to and from the office is not tax deductible, so seek advice from an accountant regarding your home being the “new office”. If you had to regularly get the mail for your employer, or pick up work parcels, these costs may be tax deductible for the public transport ticket and the kilometres travelled by car, depending on the journey.
- At-home alcohol and snacks for your Zoom team socials. Your employer might have purchased wine and snacks for office socials, but this was out of good will, as alcohol is not a tax-deductible purchase. As these items are more of a luxury, rather than a necessity for doing your job, your employer may reimburse you for these items but the ATO won’t allow you to make a tax deduction for them.
Helen continues: “To help Aussies find out how much they can get back during their tax return this year, there are free, simple-to-use tools such as the Money.com.au tax return calculator. Money.com.au can also provide consumers with information on a range of financial products, around tax returns, personal loans and tips on how to save.”
