Work from home expenses under scrutiny & the perils of browsing Facebook

The ATO has indicated that it will be focusing on four typical types of expenses relating to working from home this year. These will be relevant where clients are using the ‘actual’ method to claim deductions connected with working from home (rather than the “short-cut” or standard cents per hour methods).

The four nominated categories of expenses are:

  • Personal expenses such as coffee, tea and toilet paper
  • Expenses related to a child’s education, such as online learning courses or laptops
  • Claiming large expenses up-front (instead of claiming depreciation for assets)
  • Occupancy expenses such as rent, mortgage interest, property insurance, land taxes and rates, which cannot generally be claimed by employees working from home.

Also, in order to use the short-cut or standard cents per hour methods taxpayers will need to have some evidence of the calculation of the number of hours they worked from home. Things like timesheets, activity logs or agreements with employers could be useful for this purpose.

A recent case before the AAT shows how determined the ATO is to crackdown on work-related deductions where there is no sufficient nexus between the expense and the taxpayer’s work.

In this case, the taxpayer claimed car and clothing expenses, home internet, and mobile phone costs. The ATO conceded the car costs but on a reduced deduction. When it came to clothing expenses, the ATO acknowledged that a deduction could be claimed for gloves and a beanie on the basis that the taxpayer worked in cold conditions and that these were protective clothing needed for the job.

However, the AAT refused to allow a deduction for the cost of a pair of socks on the basis that they were not protective in nature in their own right – yes, it does get this detailed.

The taxpayer had also claimed 100% of his home internet expenses, but the ATO reviewed this claim and reduced the deductible amount to $50 – a record of the family’s home internet usage demonstrated the use of internet to browse Facebook amongst other non-work-related sites.

One of the other issues to come out of this case was the importance of record keeping. If you are going to claim work-related expenses, ensure you have the records to prove your claim.

Click on the link below if you need more guidance on this matter.

CONTACT US NOW
Back to blogs