Tax Deduction for Home Office Costs?
Tax Return - Tax Deduction for Home Office Costs?

Tax Deduction for Home Office Costs?

Published on January 1, 2018
Sam Inayat - Bookkeeping, Tax return and BAS expert

Senior Accountant at Top Accountants

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 thisarticle we will cover following home office costs tax deduction questions:

  1. How do I calculate & claim home office costs as a tax deduction?
  2. List of home office costs you can claim as a tax deduction?

1. How do I calculate & claim home office costs as a tax deduction?

ATO has provided two different ways to claim home office as a tax deduction as following:

  1. 1 Diary and actual running cost
  2. 2 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 45 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 45 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.

2. List of home office costs you can claim as a tax deduction?

Below is the list of home office costs you can claim under ‘Diary and actual running home office cost’ method:

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.