Taking a shortcut
Monday, October 5th, 2020 at 09:34pm
It is now October which means for Australians that their tax return is due by the end of the month. I always do mine as early as possible so I can get my tax refund as early as possible, but I have noticed a couple of articles popping up and also while cleaning up my desk I found some notes with my calculations.
With so many more people working from home, the ATO introduced a new “shortcut method” for claiming home office expenses, this is in addition to the existing “fixed rate” and “actual cost” methods.
As I was one of those working from home I sat down and worked through all three methods (not fully but enough) to determine which was the best for me to use.
Shortcut method
By definition this is the easiest to work out, you claim 80 cents for each hour you worked from home, this is all you can claim as it covers electricity, heating, internet, depreciation, etc.
As I knew I would be claiming something I had been keeping a record of when I had been working, so I counted them up and got 73 days. As I had always put in eight hours of work (making up time on a couple of days such as when my power was out) this meant I could claim:
73 days * 8 hours * $0.80 = $467.20
Fixed rate method
Under this method you need to have a home office, but if you do you can claim 52 cents for each hour (which covers electricicty, heating and decline in value of office furniture) and then the work related use of phone, internet, consumables/stationery and decline in value of the equipment.
The first part is simple:
73 days * 8 hours * $0.52 = $303.68
Phone and consumables are also easy as I don’t use my phone for work and I have used about ten pages of a cheap notebook, so no cost incurred there.
My laptop is provided by work so there is no cost I have incurred for that. I am using my existing monitors, keyboard, mouse, etc but they are all a couple of years old and it wasn’t clear if they were already part of the fixed rate or should be calculated on their own, I decided to leave them out.
The remaining item to calculate is internet. I live alone so 100% of it is used by me, but how much of that is work related? I pay $80 per month for an unlimited plan, so there are is no clear time based or usage based way to split between work and non-work. The best answer I could find is to pick a method that you can justify.
First let’s see about time based: there are 168 hours in a week, if I worked every day then that is 40 hours. So 24% of my internet use is work related. I pay $80 per month and there were three and a half months of working from home:
3.5 months * $80 * 24% = $67.20
What about usage based? I keep track of some stats for a few days and found that the data used from my work laptop ranged from a low of 300MB one day to a high of 2GB on another day that had a few Zoom meetings. That was lower than I expected, and also nothing compared to what I use for non-work, as a percentage it would be in the single digits, so I didn’t continue down this path as time based is higher.
So where does this method leave me?
$303.68 + $67.20 = $370.88
I can claim more under the shortcut method than the fixed rate method.
Actual cost method
The final method is where you work out all the individual costs, but what are they?
In my study the modem, router and two computers are on 24/7, so there is no additional cost for them to also be on when I am working.
However there are work related things that do consume electricity:
- my monitors, speakers and desk lamp would normally be turned off, using a power meter I found that collectively they consume 0.075kWh
- averaged over a few hours, I measured my work laptop at 0.013kWh
- the ceiling light is an LED that comes in at 0.007kWh
Combining these together and multiplying by the cost of electricty at the time:
( 0.075kWh + 0.013kWh + 0.007kWh ) * $0.262 = $0.025/h
Hmmm… claiming 2.5 cents per hour is a lot less than claiming 80 or 52 cents per hour.
The other thing that is now on when I am working from home is my central heating. This is gas, so I will first work out how much electricity it uses. As this is controlled through Home Assistant I can see when it is turning on or off, and I am also pulling instantaneous usage from my smart meter.
I could probably do a deep analysis to get real values, but instead I looked at a couple of cold days and found that the heating is on for ten minutes of every hour, and when it is on the power usage jumps by about 400W for those ten minutes:
( 10 minutes / 60 minutes ) * 0.4kW * $0.262 = $0.017/h
This means my total cost of electricity to work from home was:
( $0.025/h + $0.017/h ) * 73 days * 8 hours = $24.52
The only thing I have that uses gas is my central heating, so I don’t need to worry about splitting the type of usage (eg heating vs cooking vs hot water), I just need to come up with a work and non-work ratio.
I don’t have the heating on 24/7, but the months that I was working from home were all cool to cold, so the heating was on for most of the time that I had it scheduled. If I said that during the day on a weekday was work, with weekday evening and weekends being non-work, my estimate was 40% of the schedule was work.
The cost of gas varies throughout the year, based on my bills I estimated the cost for the period I was working from home to be:
$420 * 40% = $168
From what I worked out for the fixed rate method I have internet expenses to include, but I have no expenses for consumables or any legitimate decline in value for furniture or equipment. I also have no specific cleaning expenses for my study, so not including anything for that.
After all this, where am I up to?
$24.52 + $168.00 + $67.20 = $259.72
Comparison
Putting the different methods side by side:
- Shortcut: $467.20
- Fixed rate: $303.68
- Actual cost: $259.72
If I had needed to buy a computer for work or new furniture the situation might have been different, but the shortcut method works best for me so that is what I went with.
