The COVID-19 pandemic has impacted all Australians in ways far beyond those unfortunate 7000 (and counting) who have contracted the illness. The issues of mental health, education and care for the elderly and infirmed have all come to the fore over the past 10 weeks. Similarly, financial planners face a new range of issues that require consideration when guiding clients through this unprecedented environment.
This month’s Industry Insights looks at five new issues for financial planners and their clients to consider in this COVID-19 landscape.
2. Keeping records of home office costs
Many clients will have found themselves working from home during the coronavirus pandemic, often for the first time. In amongst the chaos of setting up a space to work, managing kids who are unable to go to school or day care, and stocking up on toilet paper, few will have considered whether they are eligible for tax deductions on their home office expenses.
Chances are that, even with basic record-keeping, these clients could claim hundreds, and in some cases, thousands, of dollars in home office tax deductions. In most cases, these costs will come from three main sources – running expenses, work-related phone and internet expenses, and the decline in value of office equipment and furnishings.
Those with a meticulous record-keeping system may be able to claim the actual costs of working from home. For most mere mortals, the ATO allows two standard formulae for those working from home during the COVID-19 pandemic:
- An all-encompassing COVID-19 deduction rate of 80 cents per hour. No further costs can be claimed on top of this amount. To use this formula, a client must keep a record of the number of hours worked from home as a result of COVID-19, such as a timesheet, diary note or roster.
- A standard home office deduction rate of 52 cents per. Some additional costs on top of this amount can also be claimed, including phone and internet expenses, stationery and the decline in the value of computer equipment. To use this method, a client need only diarise their home office use for a four-week period and extrapolate that out over the period they work from home. Additional costs must be recorded, although phone and internet expenses for up to $50 require little documentation.
- The ATO provides detailed information on both the standard deduction rate, and the COVID-19 deduction rate, on its website.
The information contained in this publication is based on the understanding KeyInvest (ABN 74 087 649 474 AFSL No. 240667) has of the relevant Australian legislation as at the date shown in this publication.
The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. KeyInvest is not a registered tax agent under the Tax Agent Services Act 2009. We recommend that your client be referred to their registered tax agent or legal adviser prior to implementing any recommendations that you may make based on the information contained in this publication.