Working From Home is Taxing in More Ways Than One

The coronavirus will impact what the Australian Taxation Office decides to look at this tax season and those employees you have had working from home could be in its sights.

Even you could cop a few questions along the way!

Business practices were altered during the coronavirus and folks working for your companies may find themselves the subject of questions if certain kinds of expenses are unthinkingly claimed because they were given a tick in previous years.

Border closures, travel restrictions between and within states and the workplace upheavals that followed meant that the behaviour of workers had to change.

The tax office is expecting that those changes will be reflected in the way in which people are compiling their claims for deductions in their tax returns.

How do we know?

The ATO told the community not so long ago that it will run the ruler over anything that usually appears in an individual’s claim during a non-pandemic period that might indicate that a person is trying the system on.

Assistant Commissioner Tom Loh has noted in a tax office media statement that the ATO is expecting an increase in working from home expenses given the nature of lock downs experienced in various parts of the country.

Loh noted that car and travel expenses fell by around 5.5%, uniform and clothing expenses increased by about 2.6% and that the tax office’s computers will be chewing through data to determine whether deductions claimed by individuals are justified.

Justification will usually mean ensuring that you have invoices and records to be able to substantiate claims if that tax office comes knocking.

Tricky claims from taxpayers wanting to “cut and paste” deductions from previous years in the hope nobody notices them are likely to be frowned upon if discovered by digital sleuthing via the ATO’s data matching system.

One of the major areas that the tax office is highlighting is travel between the home and office. While the lock down has meant that people have been occasionally required to go into the office for business purposes this does not automatically mean that the trip to the office gets to be on your list of things for which you get a deduction.

“In 2020, we saw a decrease in the value of work-related expenses for cars, travel, non-PPE clothing and self-education as a result of the introduction of travel restrictions and limits on the number of people who could gather in groups. We expect this trend to continue in the 2021 tax returns,” the tax office explained in a recent public statement.

“If an employee is working from home due to COVID-19, but needs to travel to their regular office sometimes, they cannot claim the cost of travel from home to work as these are still private expenses.”

Why is a claim not permitted for the ride between home and business premises if you have been forced to work from home? The lock down might have caused people to work from home, but home is not the usual place of work.

Travel that is more likely to be claimable as a deduction is travel to meetings from the worksite and back. It is always best to seek advice if in doubt about how what travel is claimable.

Some people may be able to claim personal protective equipment especially if they are in industries such as healthcare, cleaning, aviation, hair and beauty, retail and hospitality. There’s a catch, however, and that is the individual had to have purchased the masks or other gear themselves, the workplace did not reimburse them for the expense, and that they bought the item for use at work.

There is a shortcut method people have been able to use for determining deductions for every hour worked from home. That is set at 80 cents an hour but that is a temporary calculation and receipts will need to be kept for expenses people claim in future years.

Tax agents that CFO Magazine has spoken to in the past week have also mentioned that attempts by people working from home to claim morning coffee snacks are likely to be frowned upon by the tax office.

In other words, trying to claim your Scotch Fingers, Tim Tams, and Nescafe instant coffee because more time was spent working at home for a period rather than at company headquarters may not be such a great idea.

Tax office warnings are also a reminder for entities of any size to ensure that their staff are familiar with procurement and reimbursement rules that apply within a company.

Most companies will have policies that relate to expenditure that a company will reimburse and the conditions under which that reimbursement will be provided.

These are internal corporate documents that are probably about as much fun for staff to read as visiting a dentist, but ensuring staff members fully understand the consequences of these policies means they will be able to determine what they are able to claim as a deduction in their income tax return.

It is also important that staff are also told that they should seek tax advice if they are uncertain about the way tax law may apply to their situation.

Author – Tom Ravlic

Tom Ravlic is an investigative journalist and author, specialising in financial services, corporate governance and legal matters.