As a large proportion of Australia’s workforce continues to work from home, the Tax Office needs to revisit the way it treats travel expenses for taxpayers whose homes have become their offices, according to John Jeffreys, tax counsel at Tax & Super Australia.
“If someone now works predominantly from home and goes into their employer’s premises occasionally or sporadically, has the person’s home become their place of employment?” Mr Jeffreys said.
“If this is the case, expenses of travel between that person’s home and an employer’s office could become tax deductible. This could include ancillary costs, such as parking.”
Mr Jeffreys’ calls for a review of travel expense claim entitlements for those working from home follow an alert issued by the ATO last week where it warned tax agents and taxpayers that it would be on the lookout for claims containing ineligible work-related expenses.
In the alert, ATO assistant commissioner Tim Loh said that while work-related expenses are expected to spike for the 2021 income year, taxpayers should be aware that some expenses, like travel, might not be eligible.
“We know many people started working from home during COVID-19, so a jump in these claims is expected,” Mr Loh said. “But if you are working at home, we would not expect to see claims for travelling between work sites, laundering uniforms or business trips.
“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. 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.”
However, Mr Jeffreys said the ATO’s position may not be consistent with tax law if a taxpayer’s home has become their place of work.
“In the situation where someone had agreed with their employer that their home was their work location and not the employer’s premises,” he said, “you would expect that person to be reasonably able to claim travel costs, such as train tickets, parking or petrol, on the occasions they do travel to an office.”
Mr Jeffreys said that the mass adoption of hybrid work arrangements should prompt a review of employment contracts, too, so that taxpayers can leverage working from home as a necessity to claim a broader range of expenses.
“For a deduction to be claimed for travel from home to an employer’s premises, the ATO will probably want to see that an employee’s employment contract specifically states that the employee is expected to work from their home but may be requested to attend the employer’s premises from time to time,” he said.
As well as issuing warnings over travel expenses, the ATO earlier this month turned taxpayer attention to other ineligible work-related expenses for those working from home who opt in to its temporary shortcut method come tax time.
Earlier this month, the ATO urged all taxpayers to be aware that, while the temporary shortcut method will remain available to those claiming work-from-home deductions this year, personal and occupancy expenses, among others, cannot be claimed through any method.
Personal expenses like coffee, tea and toilet paper cannot be claimed by taxpayers who were forced to adapt from hybrid working arrangements last year. Other ineligible expenses include those related to a child’s education as well as large upfront costs.
Those could include any asset that costs over $300, like a computer, which can’t be claimed immediately and should instead be spread out over a number of years.
The ATO also warned that employees generally aren’t able to claim rent, mortgage interest, property insurance, or other land taxes and rates. The Tax Office said that working from home does not make a taxpayer’s home a place of business for tax purposes.
The ATO warned that claiming occupancy expenses could expose some taxpayers to capital gains tax when they leave their homes.