Can I claim work from home as tax deudction or home office expenses. The answer is "YES". However, you must be working from home to fulfil your employment duties and incur additional expenses as a result of working from home such as home office expenses.
In this article we will cover following home office expenses and work from home (WFH) tax deduction questions:
- How do I calculate work from home (WFH) and home office expenses as a tax deduction?
- List of home office expenses and work from home items you can claim as a tax deduction?
1. How do I calculate work from home (WFH) and home office expenses as a tax deduction?
ATO has provided two different ways to claim work from home and 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 67 cents per hour effective from 1 July 2022
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Fixed rate method 67 cents per hour, in this method you can use a fixed rate of 67 cents per hour for work from home & 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 67 cents per hour is valid from 1 Jul 2022 and previously 52 cents per hour rate is valid from 1 July 2018 onwards, for the previous financial years it was 45 cents per hour rate. Furing Coiv ATO also provided with shortcut method of 80 cents per hour for period 1 Apr 2020 to 30 Jun 2022.
To claim the work-related portion of your working from home expenses, you must keep:
a record of the number of actual hours you work from home during the income year or a diary for a representative four-week period to show your usual pattern of working at home
receipts or other written evidence that shows the amount spent on expenses and depreciating assets you purchase
phone accounts identifying your work-related calls and private calls to work out your percentage of work-related use for a four-week representative period a diary that shows your work-related internet use
the percentage of the year you use your depreciating assets exclusively for work. If you record your hours worked from home during a four-week representative period you can use it across the rest of the income year to work out the total number of hours you worked from home. However, if your work pattern changes you need to create a new record.
If you don't have a representative four-week period of your hours worked from home or your work-related use of your phone, internet and depreciating assets because they vary throughout the income year, you will need to keep records for the entire income year.
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COVID work from home shortcut method 80 cents per hour, in this method you can claim a deduction of 80 cents for each hour you worked from home for the period between: 1 March 2020 to 30 June 2020 in your 2019–20 tax return, and 1 July 2020 to 30 June 2021 in your 2020–21 tax return.
If you: were working from home to fulfil your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls incurred additional running expenses as a result of working from home.
The shortcut method doesn’t require you to have a dedicated work area, such as a private study.
The shortcut method covers all additional deductible running expenses, including:
electricity for lighting, cooling or heating and running electronic items used for work (for example, your computer), and gas heating expenses
the decline in value and repair of capital items, such as home office furniture and furnishings including capital items that cost less than $300
cleaning expenses, your phone costs, including the decline in value of the handset, your internet costs, computer consumables, such as printer ink and stationery the decline in value of a computer, laptop or similar device.
You don't have to incur all these expenses to use the shortcut method, but you must have incurred additional running expenses in some of these categories when working from home.
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.
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This information is intended as a guide. All actual detail and circumstances differ, refer to ATO website for current legislation. Please discuss your situation with Top Accountants at https://topaccountants.com.au/tax-return
Contact our tax accountants at 1300 009 007 or info@topaccountants.com.au