As a result of the ongoing covid-19 pandemic and the disruption it has caused Australian taxpayers, the Australian Tax Office (ATO) has confirmed that the work from home shortcut method will be extended until the end of June 2022.
The work from home shortcut method means that taxpayers will be eligible to claim the 80 cents per hour temporary shortcut method to calculate working from home deductions.
The ATO highlighted that the existing fixed-rate method which is 52 cents per hour and the actual cost method are still available options for members or clients to use.
“To give your clients’ the flexibility to choose the method that will give them the best outcome at tax time, it’s important to remind them of the eligibility requirements and to keep the right records now,” deputy commissioner, individuals and intermediaries,” said Hoa Wood from the ATO.
“For the 2022-23 tax return, we are looking to modernise the 52 cents per hour fixed rate method and make it easier and simpler to use, given that more Australians will be working from home in the longer term. More on this later, but in the meantime, we hope the extension of the shortcut method continues to provide administrative support for clients finding themselves working from home in unprecedented times,” continued Hoa Wood.
Many people have been hoping that the ATO would extend the shortcut method and the announcement to reintroduce it has been positively received by the Australian public.
The 80 cents per hour shortcut method is the most desirable option to use for individuals who are working from home, as it less administratively less cumbersome and nowhere as restrictive than the alternative methods.
One of the advantages of the 80 cents shortcut method is that it doesn’t require a person to have a dedicated office space. This means that it doesn’t matter where an individual is working within their house, the individual who is working from home could be working in the lounge room, their bedroom or at the kitchen table or anywhere else.
Furthermore, if there is more than one person per household working from home, then each individual can claim the short cut method independently.
In comparison, the alternative work-from-home tax deduction methods require the tax payer to have a dedicated office space which for many taxpayers may be difficult to obtain.
To apply the 80 cent per hour shortcut method all an individual has to do is keep a track of every hour that they are working from home each day and multiply the number of hours they work each day by 80 cents to determine how much of a deduction they will receive.
As a result of the expectation that work from home claims would rise due to the covid-19 enforced lockdowns, the ATO introduced the 80 cents per hour tax shortcut method in April 2020.
The temporary shortcut method, expired on 30th June 2021, allowing taxpayers to claim a fixed rate of 80 cents an hour for all running expenses incurred as a result of working from home, as opposed to calculating costs for specific expenses.
Over 1 million Australian taxpayers used the 80 cents work-from-home method during 2020.
Michael Croker, Tax Leader at Chartered Accountants Australia and New Zealand, expressed his support of the ATO’s decision to re-introduce the 80 cents shortcut method.
“We welcome the extension of the shortcut method which gives Australians a boost of confidence and assurance following the uncertainty of lockdowns. We advocated for this extension as many clients are naturally asking their accountants whether they can use this method for the next financial year while they are helping clients to prepare their current tax return,” said Michael Croker.
The covid-19 pandemic has forever changed the structure of Australia’s workforce. Looking to the future even after the covid-19 pandemic is finished a large number of Australian workers are likely to continue to work from home. As a result of this, Michael Croker is calling upon the ATO to make the 80 cent per hour shortcut method a permanent fixture.
“A Productivity Commission papers tell us that in less than two years, we have gone from less than 8 per cent of Australians working from home to 40 per cent which means our tax system must be agile enough to keep pace and adapt,” said Michael Croker.
“With the strong likelihood of workers continuing to work from home at least part of a week going forwards, it is time to consider making this temporary shortcut a permanent feature of Australia’s tax law,” continued Michael Croker, Tax Leader at Chartered Accountants Australia and New Zealand.