In response to “continued extenuating circumstances of COVID-19” and further lockdowns since 1 July, the Tax Office said it has extended the deduction shortcut until 30 June 2022.
This will see taxpayers able to claim the 80 cents per hour temporary shortcut method to calculate working from home deductions. The ATO flagged that the existing fixed-rate method (52 cents per hour) and the actual cost method are still available options for members or clients to use.
“To give your clients’ the flexibility to choose the method that will give them the best outcome at tax time, it’s important to remind them of the eligibility requirements and to keep the right records now,” deputy commissioner, individuals and intermediaries, Hoa Wood said.
“For the 2022-23 tax return, we are looking to modernise the 52 cents per hour fixed rate method and make it easier and simpler to use, given that more Australians will be working from home in the longer term.
“More on this later, but in the meantime we hope the extension of the shortcut method continues to provide administrative support for clients finding themselves working from home in unprecedented times.”
Institute of Public Accountants general manager of technical policy Tony Greco said the announcement by the ATO is a welcome one.
“We have been eagerly awaiting this announcement which will be well received by most taxpayers that have been required to continue to work from home during current lockdowns,” Mr Greco told Accountants Daily.
“For most taxpayers this is best option to use as it less administratively less cumbersome and nowhere as restrictive than the alternative methods. For example the alternative methods require you to maintain a dedicated office space which for many taxpayers may be problematic.
“The shortcut method does not require a dedicated office space so it does not matter where you are in the house – It can be the kitchen table or the lounge room for that matter. Also if there are more than one individual per household working from home, then each individual can claim the short cut method independently.”
Mr Greco noted the eligibility rules are considerably straightforward, creating ease for many employees.
“There are eligibility rules but essentially all employees need to do is to keep a track of hours each day they are required to work and multiply it by the 80 cents per hour rate to substantiate their deduction,” he explained.
“There will be individuals where the existing alternative methods may be more beneficial but for most this opportunity to continue to use the short cut method for the current tax year will be a welcome announcement.”
Michael Croker, Tax Leader at Chartered Accountants Australia and New Zealand, echoed a similar sentiment.
“We welcome the extension of the shortcut method which gives Australians a boost of confidence and assurance following the uncertainty of lockdowns,” he said.
“We advocated for this extension as many clients are naturally asking their accountants whether they can use this method for the next financial year while they are helping clients to prepare their current tax return.
“A Productivity Commission papers tell us that in less than two years, we have gone from less than 8 per cent of Australians working from home to 40 per cent which means our tax system must be agile enough to keep pace and adapt.
“With the strong likelihood of workers continuing to work from home at least part of a week going forwards, it is time to consider making this temporary shortcut a permanent feature of Australia’s tax law.”
Confirmation of the ATO’s shortcut method extension comes after prompting from members of the tax profession.
Last month, Mr Croker was among those to urge the ATO to expedite its review into whether or not it would extend the measures, noting that clarity on the issue would allow tax agents to confidently advise clients at tax time.
“At a time when many tax agents are helping their individual clients to prepare their tax return for 30 June 2021, the 80-cent deduction is often discussed and the obvious question clients ask is whether they can calculate the same deduction for FY 2022,” he said at the time.
“Logic would suggest it should continue on the grounds of simplicity. After all, many in NSW and Victoria remain in lockdown and must work from home.”
Emma Ryan is the deputy head of content at Momentum Media and editor of the company's legal publication, Lawyers Weekly.
Emma has worked for Momentum Media since 2015 and has been responsible for breaking some of the biggest stories in corporate Australia. In addition, she has produced exclusive multimedia and event content related to the company's respective brands and audiences.
A journalist by training, Emma has spent her career connecting with key industry stakeholders across a variety of platforms, including online, podcast and radio. She graduated from Charles Sturt University with a Bachelor of Communications (Journalism).