The way we work is changing. Increasingly, we demand flexibility in the way we work or run our business and it is now common for people to spend at least some of their time working from home; sometimes at weekends, sometimes at night and sometimes during the day to work around commitments such as child care.
In this article we will cover following home office expenses tax deduction questions:
- How do I calculate & claim home office expenses as a tax deduction?
- List of home office expenses you can claim as a tax deduction?
1. How do I calculate & claim home office expenses as a tax deduction?
ATO has provided two different ways to claim home office expenses as a tax deduction as following:
- Diary and actual running cost
- ATO provided rate per hour
Tax payer is suggested to select only one way depending upon whichever provides greater refund.
1.1 Diary and actual running cost
In this method, you will need to keep a diary to work out how much of your running expenses relate to doing work in your home office. The diary needs to detail the time you spend in the home office compared with other users of the home office. Keep diary records for a representative four-week period. Once four weeks diary is complete, use it as an average to calculate remaining months home office costs deduction.
1.2 ATO provided rate per hour
In this method, You can use a fixed rate of 52 cents per hour for home office expenses for heating, cooling, lighting and the decline in value of furniture instead of keeping details of actual costs. You just need to keep a record of the number of hours you use the home office and multiply that by 52 cents per hour. Under this method you can also include the decline in value of office equipment (i.e. computers, faxes, etc.) but not furniture. The 52 cents per hour rate is valid from June 2018 onwards, for the previous financial years it was 45 cents per hour rate.
2. List of home office expenses you can claim as a tax deduction?
Below is the list of home office expenses you can claim under 'Diary and actual running home office expenses method:
- Occupancy expenses such as rent, mortgage interest, rates, land taxes and insurance premiums
- Running expenses such as: Home office equipment, including computers, printers, telephone.
- Costs of repairs to your home office furniture and fittings
- Cleaning expenses
- Computer consumables, stationery, telephone and internet costs
Important note: You can claim the full cost (for items costing up to $300) or the decline in value (for items costing $300 or more)
Being able to claim these expenses depends on whether your home is your place of work or business and if you have an area set aside exclusively for work activities.
If your home is your place of work and you have an area set aside exclusively for work activities, you may be able to claim both occupancy and running expenses. If, as is more typical, you carry on your work or business elsewhere (at an office, perhaps) but do some work at home occasionally, you cannot claim occupancy expenses - even if you have a home work area set aside.