The ATO's Shortcut Makes Tax Time Easier but You Could Lose out on Money

The ATO's shortcut is a godsend for any lazy tax return DIY-er but a tax expert has said it might not give you the best bang for your buck. Here's why.

Back in early April, the coronavirus restrictions meant everyone was forced to stay home and that included many workers too. Recognising everybody's working from home tax bill would probably be a little more complicated this year, the ATO offered a shortcut method to help us out.

This new method meant you do a far simpler calculation — you claim 80 cents for each hour worked between 1 March 2020 until at least 30 June 2020 and you 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.

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 Etax Accountants.

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.