What Tax Deductions Can I Claim When Working from Home
Written by Bindi Gethen
Australia has seen a remarkable shift towards working from home (WFH), especially post-pandemic. The latest data by the Australian Bureau of Statistics (ABS) states that 37% of Australian workers are taking advantage of remote work arrangements.
Besides offering convenience, working from home also provides some tax deductions. These working-from-home tax deductions range from occupancy expenses for a dedicated home office area to running expenses like internet and electricity. These are your rightful tax claims. But you need to know what you can claim to reduce your tax bill.
Let’s delve into what working-from-home tax deductions you can claim.
What Is the Eligibility to Claim Working from Home Expenses?
You have to meet certain conditions to claim working-from-home tax deductions. The Australian Taxation Office (ATO) has set some guidelines for who can claim these deductions.
According to these guidelines:
- You must have spent the money yourself. Your employer should not have reimbursed you at any point during the tax year.
- The expense must be directly related to your work. This doesn’t include minimal tasks like occasionally checking your email or taking work-related calls. You should do the bulk of your work from home.
- More importantly, you need a dedicated work area in your home. It could be a home office or a specific spot set aside for work. Casual use of your dining room table doesn’t typically qualify for home office expense claims.
- You also need to keep records to substantiate your claims. These can include receipts, diary entries, or itemised phone bills.
What Can I Claim Working from Home?
If you meet the eligibility criteria for working-from-home expenses, you can claim the following:
1. Occupancy Expenses
These working-from-home tax deductions include costs associated with owning or renting your home. You can claim expenses such as rent, mortgage interest, and land taxes. In some cases, you can also claim house insurance premiums.
Pro tip
The claim is typically based on the percentage of your home's total floor area used for work. However, claiming these expenses now may have implications (capital gains tax) when you sell your home.
2. Running Expenses
Running expenses are the costs you pay for using your home as an office. These may include electricity or gas (energy expenses) for heating, cooling, and lighting. You can also claim tax deductions for home office furniture and equipment repairs.
Other running expenses include:
- Home and mobile internet or data expenses.
- Mobile and home phone expenses.
- The decline in value for depreciating assets like furniture (chairs, desks) and equipment (computer, printer) for items over $300 or the full cost for items costing up to $300.
- Cleaning expenses for your home office area.
However, you can claim only a work-related portion of these deductible home office expenses. For example, if 50% of your internet usage is for work, you can claim 50% of the bill. So, maintain a detailed record of your usage to support your claim.
3. Computer Consumables and Stationery
Most home offices need computer consumables and stationery. Whether it’s your printer, ink cartridges, software, or stationery, their operating costs may count as working-from-home tax deductions. Keep a detailed record of these expenses to ensure a hassle-free claim.
Related articles:
Different Tax Deduction Methods
From 1 July 2022, the ATO has set two methods to calculate working-from-home tax deductions. You can use one of the methods to calculate your deductions.
1. Actual Cost Method
As the name suggests, this method allows you to claim the actual expenses incurred for your home office. The working-from-home tax deductions you can claim using this method include:
- Home internet and mobile data.
- Home phone and mobile expenses.
- Electricity and gas for heating, cooling and lighting.
- Stationery and computer consumables.
- Home office cleaning expenses.
- The full cost of office equipment/furniture that costs less than $300.
- Depreciation on office equipment/furniture that costs more than $300.
Pro tip
The actual cost method is more detailed and requires precise record-keeping. Keep records like receipts, bills, and a diary/logbook to justify your claims. And remember, you can only claim the work-related portion of these expenses as a deduction. So, whether claiming internet costs for work at home or cleaning expenses, claim only the portion you spent on work-related tasks.
2. Fixed Rate Method
The fixed-rate method is relatively simple. It allows you to claim 67 c for each hour you work from home.
It’s easier to keep track of your expenses as you only need to log the number of hours you work from home. However, you can’t claim additional separate deductions for these expenses. ATO is not fond of double deductions.
But you can still claim deductible home office expenses like:
The full cost of office equipment/furniture that costs less than $300.
Depreciation on office equipment/furniture that costs more than $300.
In some cases, you may also be able to claim home cleaning and occupancy expenses if you have a dedicated office area. But this method may not always be the best option, especially if your actual expenses are higher than the fixed rate covers.
Related articles:
How Bookkeeping Services Save Your Life During Tax Season
A Taxing Problem: How Taxes Affect Small Businesses
Keep a Record of All Your Tax Deductibles
Keeping accurate records is crucial regardless of which method you use. Detailed records allow you to claim the maximum working-from-home tax deductions you’re entitled to. Without records, you may forget to claim some expenses.
Another benefit of accurate record-keeping is that it supports your claims. Records can prove helpful in case of an audit. The ATO may request proof of your expenses, which you can quickly furnish if you have detailed records.
And most importantly, good record-keeping simplifies your tax preparation process. It saves you time and potentially money if you hire a certified tax agent.
Frequently Asked Questions
Usually, you have two options. Option one is to claim the full cost for items costing up to $300. Option two is to claim the depreciation of the furniture. It applies to items costing more than $300.
Multiply the total hours you’ve worked from home by the fixed rate. This rate was 67 cents per hour in 2023. This method covers electricity, heating, and furniture depreciation. You can also claim other deductions if eligible.
No, personal expenses like coffee and tea aren’t tax-deductible. You can’t claim these expenses even if you drink coffee or tea while working.
Yes, you can claim the work-related portion of these expenses. For example, if you spend 20% of your phone usage on work-related calls, you can claim 20% of your phone bill.
Keep receipts for all expenses. Log the hours you spent working at home. These records are critical in claiming deductible home office expenses.
Let’s Simplify Your Claim for Deductible Home Office Expenses
You can claim substantial deductions if you work from home. But whether you claim running expenses, occupancy expenses or both, you need detailed financial records to ensure accurate and swift tax refunds. That’s something we can help you with. Our experienced team can help maintain your financial records perfectly.
Hey, my name’s Bindi Gethen! I’m the founder of The Bookkeeping Studio in Australia. With over 15 years of experience in the industry, I have a deep understanding of the challenges that small and medium-sized business owners face when it comes to managing their finances.
I am passionate about empowering my clients with the financial information they need to succeed. My team and I pride ourselves on our commitment to exceptional value, accuracy, and confidentiality. Our virtual bookkeeping services include payroll, budgets, and management reporting, among others.
Not to toot our own horn, but we can assure you that you won’t find a bookkeeping partner like us anywhere else in the Southern Highlands.
