CLAIMING HOME OFFICE EXPENSES
If you perform work duties from home you may be entitled to a tax deduction.
Home based businesses and salaried employee alike are both eligible so long as there is a clear connection to income produced, fulfilment of the employee’s role and a dedicated work area.
Occasional work from home does not guarantee deductibility of occupancy costs.
What can I claim?
- Occupancy costs (rent, mortgage interest, rates, water, land tax, insurance)
- Home office equipment such as chair, desk, printer, computer, telephone which may be eligible for immediate deduction or deducted over several years depending on your circumstance and the cost
- Telephone phone calls, texts & data
- Electricity & gas
- Cost of repairs to office space and equipment
How much can I claim?
Given your working from home there is always going to be private use so claiming 100% is very risky.
Method 1: Actual running costs
The following list is how to determine work %
- Telephone – using a typical monthly bill go through calls list and outline the work-related time as a % of overall time. This % is therefore the amount of telephone bill to be claimed
- Electricity & gas – This is an estimate based on the amount of time worked from home and likely $ contribution the activity has to the bill. Eg running a computer for consultancy services uses substantially less electricity than a home-based catering service even though the time working from home may be exactly the same. Whatever % is decided as work use needs to have logic behind it and be documented. In an ideal world detail exactly what items are being used for work and using electricity/gas authorities we can apply their hourly use rate for time worked.
- Internet, Repairs, cleaning, stationary & equipment are all based on an estimated % of time used for work vs private use
- Occupancy costs – take particular care claiming these as likely increases the tax deduction significantly and thus increases likelihood of an ATO audit. Claims are based dedicated office space as a % of the overall house floor space. Eg in an apartment might be 12sq/m of 120sq/m = 10% of occupancy costs can be claimed. If you own the home claiming mortgage interest & rates will trigger the relevant portion of your home value to become an asset for capital gains purposes so tread lightly with such claims and be sure to seek clarification from a tax agent (like us ) of possible effects on your tax return.
What records do I need to keep?
All receipts, a diary of home office use times, months standard bill showing work % for relevant costs.
Method 2: Cents per hour
Can’t be bothered with all that record keeping? Luckily there is a second, simpler option.
Keep a diary of hours worked from home. On your tax return total hours are then multiplied by 45cents/hr to come to your tax deductible figure. Much quicker and easier to calculate!
If you are eligible for home office claim but have not claimed in the past then we can also action amendments for relevant tax returns to create additional refunds.
To get advice on your circumstance and eligibility please contact us.