Working from home? You may start getting taxed more

author-avatar By on November 13, 2020
Working from home? You may start getting taxed more

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Deutsche Bank has called for a 5% tax on employees working from home.

A new report from the banking giant has analysed how a work from home (WFH) tax could turbocharge economic recovery in the US, UK and Germany.

It found many workers were substantially financially better off WFH as they had fewer expenses, costing economies billions in lost revenue. 

Report author Luke Templeman said we've needed a tax on remote workers for years, and COVID has only made this more obvious. 

"Quite simply, our economic system is not set up to cope with people who can disconnect themselves from face-to-face society," Mr Templeman said.

"Those who can WFH receive direct and indirect financial benefits and they should be taxed in order to smooth the transition process for those who have been suddenly displaced." 

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With our society built on the foundations of face-to-face interactions, the report found a huge population of the workforce at home would break infrastructure which had taken centuries to build. 

Mr Templeman said WFH was financially rewarding, and a tax would not outweigh these benefits. 

"WFH offers direct financial savings on expenses such as travel, lunch, clothes, and cleaning," he said

"Add to these the indirect savings via forgone socialising and other expenses that would have been incurred had a worker been in the office.

"Then there are the intangible benefits of working from home, such as greater job security, convenience, and flexibility." 

But Dr Jim Stanford, director of the Australia Institute’s Centre for Future Work, said the claim working from home saves money for workers meant they should pay more tax was not not necessarily true.

"WFH imposes many new costs and challenges on workers, including the cost of workplaces (not ‘free’), extra electricity and utilities, cost of equipment and supplies (paper, printer ink, etc.), and more," Dr Stanford told Savings.com.au.

"There are many challenges of balancing home work with other home care responsibilities, especially for parents."

"A hare-brained scheme"

Dr Stanford said the report's premise that people who work from home are somehow ‘free-riding’ on the rest of society, simply because they don’t go to a normal workplace, was false.

"Home workers do contribute to the infrastructure of society: They are still earning money (whether through wages and salaries if they are employed, or small business profits if they are self-employed or a contractor), spending it (they still pay for housing, consumer goods and services, eating out, etc.), and pay tax (both on their income and on their purchases through a GST)," he said. 

"So the fundamental premise that WFH needs a special, targeted tax is not at all convincing.

"Both employers and workers are still paying normal taxes, there is no free-riding going on at all." 

How would a WFH tax work? 

Mr Templeman said the WFH tax wouldn't apply to people forced to WFH, and there would be strict guidelines in place for employers. 

"First, the tax will only apply outside the times when the government advises people to work from home (of course, the self-employed and those on low incomes can be excluded)," he said. 

"The tax itself will be paid by the employer if it does not provide a worker with a permanent desk.

"If it does, and the staff member chooses to work from home, the employee will pay the tax out of their salary for each day they work from home."

He said assuming the average salary of a person who chooses to WFH in the US is $55,000, a tax of 5% worked out to be just over $10 per working day. 

"That is roughly the amount an office worker might spend on commuting, lunch, and laundry etc."

"A tax at this rate, then, will leave them no worse off than if they had chosen to go into the office." 

But Dr Stanford questioned Mr Templeman's math and this claim.

"The tax he proposes is a significant increment to existing payroll or income taxes," Dr Stanford said.

"If paid by the employer, it would be a payroll tax. If paid by the worker, it’s an income tax.

"Either way, it is a significant increase in employment taxes. This would undermine job creation right when we need it."


Disclaimers

Savings.com.au does not provide tax advice. This material has not been prepared by Savings.com.au and is for informational purposes only, and is not intended to provide, and should not be relied on for tax advice.

For tax advice relevant to you, visit the ATO or consult an independent tax advisor

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Alex joined Savings.com.au in 2019. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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