• Cherie Barber
• April 07, 2020
• 12 Comments

Coronavirus is Tax Deductible!

I’m not sure who coined the phrase “positives can be taken from every negative”. While it’s hard to see the sense in any of those words right now as we all bunker down, rest assured, good can come from bad. In this week’s blog, I’m aiming to spread my little dose of positive, amongst all the bad: “coronavirus is tax deductible”.

Now firstly, let’s face hard facts … tax is not on anyone’s minds right now, unless of course, you’re planning to use your self-isolation time to catch up on last year’s or get a head start on your 2020 tax return. Either way, you may not know that coronavirus may change the way you submit your very next tax return!

First up – if you’re someone who has previously thought “how good would it be to work from home each day”, you may be starting to realise, it’s not all cracked up to be. I’ve been working from home for 2 weeks now. I’m climbing the walls already, itching to get out. Just yesterday (as all my team digitally zoomed in for our daily WIP meeting), we all said there’s something nice about interacting with your fellow work colleagues in the office each day. Coronavirus has given my team a newfound appreciation for each other. We all want to be back together again (even though that wasn’t the case before 😊).

The reality is, millions of people are now working from home because of COVID-19. Upside: your home, is now technically also your workplace. That means you’re likely to be incurring expenses that could potentially be claimed on your next tax return.

Now, I must preface and say … I’m not an accountant and never wish to be. I’m the person least qualified to give you “accountancy advice”. But what you can rely on me for, is to pass my knowledge onto other mere mortals, on accountancy basics in an easy to understand way (not hard-core accountancy language) … You can claim expenses for work stuff, you now do from home.

Running Costs

If you’re suddenly working from home, its highly likely you’ll be using a computer – either your home computer or a company laptop. They run on electricity, not on love so that’s a potential tax claim, right there alone …

It’s also likely that you don’t sit in the dark whilst tapping away at your keyboard, that means your electricity bill, (in part, not whole) can potentially be claimed as a business expense …

Let’s get one step further … Wouldn’t it be so lovely if the internet was free but guess what – it’s not! That’s another potential claim, in whole or part.

And are you someone who loves to have your air con or heating on whilst you are working? Yep, you guessed it … That’s more of your electricity bill that you can claim.

Let’s also not forget the obvious … our phones. If you call from your home landline, that’s a claim. Mobile calls and text messages are another claim …

General Expenses

If you’ve had to rush out and buy a new computer (because your workplace didn’t have one available or your home computer is prehistoric and doesn’t move anywhere fast enough), that’s a potential claim right there …

Did you need to endure the pains of assembling a flat pack office desk because you never had one at home before? Claim. Did you need to buy an extension cord to set up your computer in your spare bedroom (aka your new temporary office) so it reaches the power point on the other side of the room? Claim right there …

With the whole world on the internet right now, has anyone else noticed how slow the internet now is? Last week, I sanitised my hands as I walked into my local Good Guys store to buy a booster to jack up my internet speed. That $199 cost will officially be factored into this year’s tax return …

Did you need to suddenly buy a notepad, pens, stationery from Officeworks? Hopefully by now, you’re getting the gist …

Depreciation of Equipment & Fixtures

Whoever thought of this … pure genius! When you use your computer, it gets older and more used which causes that item to decline in value. Apparently in accountancy land, that’s called “value depreciation”.

Your office desk & chair (that’s now your “office”) is now experiencing more wear and tear – all potential value depreciation claims. It’s heavy stuff to know and to be able to successfully make such a claim, will depend on what your item is worth. You know what to do … ask your accountant, not me! I’m merely planting the seed …. 😊

How Will the Tax Office Treat You?

Now is not the time to be getting creative and thinking “Wow, I’ll go buy this & that and the next 10 years of my stationery needs and claim everything as a coronavirus deduction. The Australian Tax Office (ATO) will be onto you faster than the virus itself!

The ATO generally allows expenses to be claimed in several ways – actual cost for the expense incurred or a fixed hourly rate. For example, if you worked 30 hours from home last week, you may be able to claim an hourly rate to cover all your combined running costs.

Keep in mind that with all the “rules”, there are always “conditions, clauses, caveats … blah blah blah …”. To claim work from home expenses, you’ll need to keep receipts of anything that you truly believe is a legitimate work from home expense.

It’s best to keep a diary of what time you start work each day, what time you stopped for breaks and what time you finished work each day. This will allow you to calculate your actual work hours each day. Might be a great time to get time tracking software on your computer! Your accountant will adore you for this, it will make their job so much easier in calculating your true deductions.

If you share your home with a partner or other “working people”, you’ll need to share your own proportions of the claims between you. You can’t be claiming the full costs on the same expenses individually. In other words, you can’t double dip.

You’ll also need to record what physical amount of space you use as your home office, so that costs can be proportioned against the total floor area in your home. The ATO generally say, you need a dedicated workspace in your home so laying in bed, working away on your laptop, may not cut it!

What’s clear is, there are rules and they are a little full on. Accept that the government ain’t going to give you money for nothing or cheques for free. But, that’s not a reason to not claim as much as you can, especially in these tough financial times where people are counting their pennies. I’ve also never met anyone that’s said, “I love paying more tax than I legally should!”. Don’t be that person, claim what you’re legally entitled to but don’t lie or overstep the mark. Remember 2 words: potential audit. If your claim looks dodgy, the tax police will come a knocking …

So that leads me right into saying …. make a quick phone call or pop an email to your friendly accountant (sooner rather than later) asking what they believe you’re eligible to claim and whether you need to do or record anything now to make those deductions happen, come tax time. Rely on your accountant (not me) as I don’t know your personal situations nor can I take your financial circumstances into account. My advice is just general in nature that’s why you should always speak to a licensed professional. Wasn’t that a lovely disclaimer there …

And whilst I’m pretty sure there won’t be any capital gains tax implications for claiming such deductions, it wouldn’t hurt to double check this with your accountant, before you finally make the decision to claim these things …

Unfortunately, coronavirus is here to stay for a little while. With our homes now our workplaces, there are questions to be asked and deductions to be claimed. Even in all the doom and gloom, there will always be some good that rises from the ashes.

Stay positive my friends.

Cherie x