Home Office – what you can claim and what you can’t

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 some of their time working from home.

The ATO keeps a close eye on the deductions which taxpayers claim for working from home.  It’s easy to make a mistake, perhaps by claiming too high a work-related proportion for a particular type of expense, claiming something that shouldn’t be claimed at all or simply not keeping evidence to prove the expense.

At Select Accounting we have encounter taxpayers who simply don’t know that they can claim for working from home. Previously, they have missed out on deductions which we know they are entitled to.

What expenses can you claim if you work from home?

The deductions you may be able to claim for are:

  • occupancy expenses such as rent, mortgage interest, rates, land taxes and house insurance premiums (but only in limited circumstances, see below)
  • running expenses such as:
  1. home office equipment, including computers, printers and telephones. You can claim the full cost (for items costing up to $300) or the decline in value (for items costing $300 or more). If you’re self-employed, you may be able to immediately write-off equipment costing up to $20,000.
  2. work-related phone calls (including mobiles) and phone rental. You can claim a portion reflecting the share of work-related use of the line if you can show you are on call, or have to phone your staff, employer, customers or clients regularly while you are away from your workplace
  3. heating, cooling and lighting
  4. the costs of repairs to your home office furniture and fittings, and
  5. cleaning expenses.

 

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 business 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.

The below table shows the deductions you can claim for the three ways you can work at home:

 

 

What you can claim How you work
Home is your place of business or work and you have a home work area Home is not your place of business but you have a home work area You work at home but you don’t have a home work area
Occupancy expenses

Cost of owning or renting the house

Yes No No
Running expenses

Cost of using a room (such as gas or electricity)

Yes Yes Yes
Business phone costs Yes Yes Yes
Decline in value of office plant and equipment (such as desks, chairs and computers) Yes Yes Yes
Depreciation of curtains, carpets, light fittings, etc Yes Yes No

 

Once you have determined the costs that you can deduct, you are required to keep the relevant records (for 5 years). These can be:

  • receipts or other written evidence of your expenses – including receipts for items of equipment you have purchased – remember receipts fade, best to scan or take a photocopy
  • diary entries you make to record your small expenses ($10 or less) totalling no more than $200, or expenses you cannot get any kind of evidence for, regardless of the amount
  • itemised phone accounts from which you can identify work-related calls, or other records, such as diary entries (if you do not get an itemised account from your phone company)
  • a diary you have created for work to calculate how much you used your equipment, home office and phone for business purposes over a representative four-week period.

 

Alternatively, you can claim a flat rate allowance of 45 cents per hour for each hour you work from home but if you claim this, no other claim for individual items will be allowed.

Make sure you claim everything you’re entitled to, not a cent less and not a cent more and make sure you can prove that expenditure either through receipts or diaries.

If you’re not sure what you can and can’t claim, contact the team at Select Accounting to ensure you claim everything you’re entitled to.

 

General advice warning:

The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]