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: 18 Jan 2022
Once you have established that you are able to claim a deduction for expenses that relate to the work you perform at home (see this article on the types of tax deductions you can claim depending in particular circumstances), you will need to consider how each type of home office deduction is calculated.
In this article, we will break down the most common home office expenses to help simplify this process for you. For more information on how you calculate your actual expenses, please refer below against each deduction type.
Contents
Costs of using a room’s utilities such as gas and electricity
Work-related phone and internet expenses
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
Decline in value (depreciation) of curtains, carpets and light fittings
Occupancy expenses such as rent, mortgage interest, insurance and rates*
Information
Costs of using a room’s utilities such as gas and electricity
The costs associated with your home office utilities are included as part of the ‘fixed rate’ method of claiming your home office running expenses, should you apply this method when preparing your income tax return. This method allows you to claim a deduction of 67 cents for each hour you work from home. You can read more about this method here.
Establishing regular hours that you work from home will help you track your hours and time spent working, making it easier to calculate these when claiming deductions like such. There are also productivity benefits of establishing regular working from home hours. The specialised recruitment firm Robert Half has developed a quick guide to creating a productive home office.
Update: For FY23 the only methods available are the revised 'fixed-rate' or 'actual-cost' methods.
If you would like to claim a deduction for the actual costs associated with these expenses, you will need to work out the following:
- the cost per unit of power used - refer to your utility bill for this information
- the average units used per hour - this is the power consumption per kilowatt hour for each appliance, equipment or light used
- the total annual hours used for work-related purposes - refer to your record of hours worked or your diary for this information.
Multiplying these three values together will provide you with the amount you can claim as a deduction for your home office utilities on your income tax return.
Work-related phone and internet expenses
Phone and internet are common expenses that are incurred when working from home. To the extent these costs are not reimbursed by your employer, they can be included as a deduction for running expenses and the ATO has specific guidance on what you may claim.
There are two ways to calculate your phone and internet expenses:
- you can claim up to $50 with limited documentation
- you can calculate your actual expenses.
You need to keep records for a four week representative period in each income year to claim a deduction of more than $50. Bear in mind that the expense must relate to the proportion of time you used your phone or internet for work-related purposes (if others share these utilities at home).
Cost of office plant and equipment purchases such as desks, chairs, computers, and monitors that are up to $300
If you pay for any home office equipment or furniture that enables you to work from home for your employer, and the item is less than $300, you can claim the full cost of this item as a deduction on your income tax return.
Cost of office plant and equipment purchases such as desks, chairs, computers, and monitors that are greater than $300
If you pay for any home office equipment or furniture that enables you to work from home for your employer, and the item is greater than $300, you can claim a deduction for the decline in value of the item in your income tax return.
The value of common furniture items is included as part of the 67 cents per hour ‘fixed rate’ method of claiming your home office running expenses, should you apply this method when preparing your income tax return. You can read more about this method here.
For other home office equipment purchases, you can claim a deduction for the decline in value in your return. You can find information on how to do this on the ATO website here. Alternatively, you can speak to a tax specialist to get more detailed guidance on this topic through our Tax Assist service, which you can read more about here.
Decline in value (depreciation) of curtains, carpets and light fittings
As mentioned above, the value of common furniture items is included as part of the 67 cents per hour ‘fixed rate’ method of claiming your home office running expenses.
If you wish to calculate the actual decline in value of these items, you can find information on how to do this on the ATO website here.
Alternatively, you can speak to a tax specialist to get more detailed guidance on this topic through our Tax Assist service, which you can read more about here..
Cleaning costs
Cleaning costs associated with your home office are included as part of the ‘fixed rate’ method of claiming your home office running expenses, should you apply this method when preparing your income tax return. This method allows you to claim a deduction of 67 cents for each hour you work from home. You can read more about this method here.
Alternatively, if you prefer to claim a deduction for the actual cost of your home running expenses, your home’s overall cleaning costs will need to be added together (according to your receipts) and multiplied by the floor area of your dedicated work area (floor area of the dedicated work area divided by the whole area of the house as a percentage*) in order to calculate your deduction for this expense type. You will then need to apportion this claim to exclude amounts that are not claimable, including:
- any private use of your home office, and
- any use that other family members make of the home office.
*As per ATO guidance
Other running expenses including computer consumables (for example, printer paper and ink) and stationery
To the extent these costs are not reimbursed by your employer, the full amounts (so long as they are under A$300) can be included as a deduction for home office running expenses on your income tax return. Just make sure you only claim the work-related proportion of these expenses, and thus exclude any private use which is not claimable.
Occupancy expenses such as rent, mortgage interest, insurance and rates
Employees are generally not able to claim a deduction for occupancy expenses on their income tax return. You can find more information about the limited circumstances in which you may be able to claim a deduction for these costs as an employee on the ATO website here. Alternatively, you can speak to a tax specialist to get more detailed guidance on this topic through our Tax Assist service, which you can read more about here.
Records you must keep
It is important 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, including 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.
- proof of how many days you worked from home (i.e. using your work calendar to reflect home and office days)
*As per ATO guidance
Still have questions?
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.
What you’ve learned:
- How to calculate the different work from home office deductions
- The records you need to keep in order to claim these amounts on your income tax return
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).
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