Suitable for: Anyone who works from home, but home is not your primary place of work
Tax Difficulty: Moderate
Airtax Experience: First-time users
Time to Read: 3-5 minutes
Last updated: Thurs 9 Apr 2020
Update: this article now includes references to the ATO’s latest announcement of the ‘shortcut method’ to claim working from home tax expenses.
WFH and Tax Deductions
If you work from home as part of your employment you may be able to claim deductions for certain expenses relating to that work. These deductions are included on your personal tax return in the “other work-related deductions” section in the tax year in which they occur.
Your home may also be your primary place of work where a section of your home is set aside exclusively to carry on a business (i.e. a doctor’s surgery). This may apply in some cases for sole traders (unlikely for employees) and is not the focus of this article.
In this Help Centre article, we have focused on individuals who work from home, but where home is not the primary place of work (e.g. you normally go to an office or worksite).
We’ll break down some key things you need to keep in mind when recording and claiming your home office expenses on the income tax return. Along the way, we’ll also highlight some example expenses you should keep in mind. For information on how to calculate these amounts, click here.
Expenses when home is not your primary place of work
The types of home office expenses available to be claimed on your income tax return will vary depending on whether you have a dedicated work area such as a study, or spare room or for example, you simply work at the end of your kitchen bench (!).
Having a dedicated area where you work does not mean that it needs to be available exclusively to you (i.e. other family members may share a study). However, you will need to apportion the running expenses you claim such that they relate only to the period of time when you use this area for work.
Where you do not have a dedicated work area within your house (i.e. you work wherever you can find space at the time), you may be limited in the running expenses that you can claim as a tax deduction. However, there are still a number of items that you can deduct.
Update: with the ATO’s announcement of the new ‘shortcut method’, a dedicated workspace is not required to claim 80 cents per hour fixed rate. This method is only valid for working from home expenses incurred between 1 Mar - 30 Sep 2020. Learn more here.
What you can and can't deduct
See the table below for information on what deductions you may be able to claim (assuming your home is not your primary place of work).
| Deductions you may be able to claim | You do have a dedicated work area | You don’t have a dedicated work area |
| Costs of using a room’s utilities such as gas and electricity | Yes | No* |
| Work-related phone and internet costs | Yes | Yes |
|
Full cost of office plant and equipment purchases such as desks, chairs, computers, and monitors that are up to $300 OR Decline in value (depreciation) for purchases that are greater than $300 |
Yes | Yes |
| Decline in value (depreciation) of curtains, carpets and light fittings | Yes | No* |
| Cleaning costs | Yes | No* |
| Other running expenses including computer consumables (for example, printer paper and ink) and stationery. | Yes | Yes |
| Occupancy expenses such as rent, mortgage interest, insurance and rates | No | No |
*Update: with the ATO’s announcement of the new ‘shortcut method’, a dedicated workspace is not required to claim 80 cents per hour fixed rate. Therefore, follow the ‘you to have a dedicated work area’ column for what you can and can’t claim. Read more about the ‘shortcut method’.
It is important to note that as an employee, generally:
- You can't claim a deduction for occupancy expenses, including rent, mortgage interest, council rates and house insurance premiums.
- You are also not able to claim a deduction for any expenses if the item was paid or reimbursed by your employer, and the benefit was exempt from fringe benefits tax.
- Only the additional running costs associated with working from home are deductible.
How do you calculate expenses?
Update: this section has been updated to include the ATO’s new ‘shortcut method’ for calculating working from home expenses.
The ATO allows two ways to calculate your running expenses:
- you can claim a fixed rate of 52 cents per hour
- you can calculate your actual expenses.
Update: The ATO announced an additional way to calculate working from home deductions - the ‘shortcut’ or fixed rate of 80 cents per hour method. This method is applicable for work from home expenses incurred between 1 March to 30 June 2020 in the 2019-20 income year, and for the 2020-21 and 2021-22 income years. This method is calculated in a similar way to the 52 cents per hour method but includes all your home office expenses. Learn more here.
Once the 'shortcut' method ends on 30th June 2022, you will have to use the 'fixed-rate' or 'actual-cost' methods.
For more information on how you calculate your actual expenses, please see this Airtax article.
Records you must keep
It is important that you keep all necessary records for your home office expense claims, such as**:
- A diary you have created to work out how much you used your equipment, home office and phone for business purposes over a sample/representative four-week period
- Receipts or other written evidence, included for depreciating assets you have purchased
- Diary entries to record your small expenses ($10 or less) totalling no more than $200, or expenses you can't get any kind of evidence for
- Itemised phone accounts from where you can identify work-related calls, or other records, such as diary entries if you don't get an itemised bill.
Tools
We are in the process of creating some tools to help you manage your home office expense claims. Check back in shortly, or email us on help@airtax.com.au and we will let you know when they are live.
Still have questions?
If you have started your Airtax income tax return, and would like a quick chat about this subject, then please sign up for a free, 10 minute Airtax chat here. Although we can’t provide any specific advice during this call, we will do our best to help you understand this information, and determine whether you need more comprehensive guidance from a specialist.
If you would like a more detailed guidance about your specific tax situation, please refer to our Tax Assist service here to speak to an Australian-based tax specialist.
Are you an employer?
If you are an employer and unclear about this information or would like to chat through working from home (WFH) implications with a PwC tax specialist, then please email help@airtax.com.au
What you've learned:
- The tax treatment of an assortment of home office expenses
- The difference between home office expenses incurred with and without a dedicated space for work in your home - including the impact of the new ‘shortcut method’
- The records you need to keep in order to claim these amounts on your income tax return
**From ATO
This document merely provides a broad outline of the subject and is necessarily general in nature. If you require specific advice, which is tailored to your specific circumstances, please do not hesitate to contact us (fees would apply).