The ATO’s Shortcut Makes Tax Time Easier but You Could Lose Money

The ATO’s Shortcut Makes Tax Time Easier but You Could Lose Money
Image: Getty Images


Tax time is a slog for many of us so the ATO’s new coronavirus shortcut is a godsend. While it’s sure to save you time, a tax expert believes it might not get you the most money back.

In March this year, many of us were suddenly forced to work from home due to coronavirus restrictions. Because so many of us started working from home, the ATO recognised our tax bills would probably be a little more complicated this year. To help out, the ATO offered a shortcut method to make it a little easier.

This new method meant you could do a far simpler calculation — claim 80 cents for every hour worked between 1 March 2020 until at least 30 June 2020 but you’ll need to forget about any other inclusions in the existing method.

While it sounds like the solution we’ve all wanted when it comes to figuring out our working from home tax figure, Liz Russell, a senior tax manager at Etax Accountants has told Lifehacker Australia it might mean losing out on extra tax dollars.

The ATO's Giving You A Shortcut To Calculate Working From Home Expenses

With many Australians now working from home amid the coronavirus crisis, electricity and internet bills will likely increase. Australia's tax system allows us to claim some of that back but it can be a bit of an arduous process. The Australian Tax Office (ATO) has now announced it's offering workers a shortcut to simplify the process. Here's what you need to know.

Read more

Explaining the numbers can be a downright bore for many of us so Russell gave us a simple example to show you why.

Example 1 – Evie – Traditional Running Expenses Method Is Best

Evie is a Town Planner who now works her 38 hours per week from home instead of the office. She
keeps track of her work related mobile phone and internet use for one month during May and works
out that 55% of her mobile phone use is work related and her internet use is 50% work related. Let’s
compare the two methods for Evie:

Running Expenses (the existing 52c method):

  • Evie can claim 38 hours per week x 52c x 16 weeks (March – June) = $316.16
  • Evie can claim 55% of her $99 monthly phone bill x 4 months = $217.80
  • Evie can claim 50% of her $80 monthly internet bill x 4 months = $160
  • Evie’s total work from home claim for March – June = $693.96

Shortcut method (the new 80c method):

  • Evie can claim 38 hours per week x 80c x 16 weeks = $486.40
  • Evie can’t claim phone or internet as it’s included in the 80c per hour rate.

Therefore, in this case, Evie’s work from home deduction claim would be $207.56 higher by claiming
the existing Running Expenses rate of 52c per hour, and her phone and internet separately.

But while the traditional method makes more sense for Evie, others might actually benefit from the shortcut method, according to Russell.

Example 2 – Oliver – Shortcut Method Is Best

Oliver is a recruitment consultant who now works his 40 hours per week from home instead of the
office. He has a company laptop and company mobile phone, but uses his home internet that he
shares with his wife. He calculates his internet use is 55% work related.

Running Expenses (the existing method):

  • Oliver can claim 40 hours per week x 52c x 16 weeks (March – June) = $332.80
  • Oliver’s monthly Internet bill is $80 a month which he shares with his wife 50/50.
  • Therefore, Oliver’s share of the internet bill is $40 and he can claim 55% of that amount for 4 months = $88
  • As Oliver has a company issued computer and phone, he can’t claim either of those items on his return as he doesn’t personally pay for them.
  • Oliver’s total work from home claim for March – June = $420.80

Shortcut method (the new method):

  • Oliver can claim 40 hours per week x 80c x 16 weeks = $512
  • Oliver can’t claim his internet as it’s included in the 80c per hour rate.

Therefore, in this case Oliver’s work from home deduction claim would be $91.20 higher by claiming
the new Shortcut method.

Unfortunately, this means you’re going to have to do some calculations yourself or defer it to an expert to make sure you’re getting the best deal possible. A shortcut sounds great but if it means selling yourself short, then that’s no fun.

This article has been updated since its original publication.

Reminder: Track Your Home Work Expenses For Tax Time

Now that a lot of us are working from home to curb the spread of coronavirus, the bills our workplaces would usually cover are now being deferred to us. That means internet, phone charges, electricity and anything else. This is a reminder to write it all down because you should be able to get a lot of it back during tax time.

Read more

Log in to comment on this story!