Suitable for: Anyone who is working from home and claiming deductions in their FY21 income tax return
Tax Difficulty: Intermediate
Airtax Experience: Anyone
Time to read: 2-4 minutes
Last updated: 18 Jan 2022
The ‘Shortcut Method’ - Alternative Method to Calculating WFH Expenses
In recognition of the huge increase in employees working from home as a result of the COVID-19 pandemic, the ATO has introduced a new simplified methodology for calculating deductible home office expenses.
The new ‘shortcut method’ allows employees to calculate working from home expenses based on a fixed rate of 80 cents per hour. It does not replace the existing methodologies that are available to calculate working from home expenses but it does provide a simple alternative for claiming expenses. This method is applicable for work from home expenses incurred between 1 March to 30 June 2020 in the 2019-20 income year, and for the 2020-21 and 2021-22 income years. Learn more here.
This method is applicable for time spent fulfilling your work duties (not for making the odd call or replying to an email). Also, there’s no requirement to have a separate home office set up in order to use the 80 cents per hour method.
Three Options for Calculating WFH Tax Deductions
So you now have three options to choose from when it comes to calculating your working from home expenses for your 2021 Australian income tax return:
Deciding which method is right for you
Scenario one: if you do not normally claim home office expenses
The shortcut method may be most appropriate. It’s simply a matter of working out how many hours you have spent working at home between between 1 March to 30 June 2020 in the 2019-20 income year, and/or for the 2020-21 and 2021-22 income years and then multiplying this by 80 cents. The shortcut method includes all your work related expenses (including depreciation and phone/internet costs).
Scenario two: if you already claim deductions in relation to working from home, have assets which you are depreciating and have existing phone and internet costs
Then you may choose to stick with the existing 52 cents per hour method. This doesn’t include deductions for phone or internet usage, computer consumables or depreciation for items like laptops or printers which can be included in addition.
Scenario three: if you love spreadsheets and are the sort of person who takes pride in recording every little detail
Then you may prefer the actual expense methodology which requires an eye for detail, some mathematics and a little bit more time.
Remember that whichever method you choose, your deduction is limited to the additional expenses you have incurred as a result of working from home. You should also keep records to substantiate your claim.
How to Calculate WFH Tax Deductions
If home isn't your primary place of work, see our overview of how to calculate expenses relating to working from home to get your head around it. We've broken it down into categories of expenses and the methods to calculate in an effort to make it easy to understand.
Got a Question?
For more detail on the nuts and bolts of each of these methodologies and additional detail on the sorts of expenses you can and can’t claim, check out our WFH frequently asked questions.
This document merely provides a broad outline of the subject and is necessarily general in nature. If you require specific advice, which is tailored to your specific circumstances, please do not hesitate to contact us (fees would apply).