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The way we work is changing, and for many people working from home is the new normal. This allows for a huge amount of flexibility plus there are numerous ways to deduct home office costs in your tax return.
Many people don’t know they are able to claim for working from home, and often miss out on valid deductions. But it’s important to make sure you stay within the rules to avoid being penalised for making a mistake.
The most common errors are: 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 records to substantiate the expense.
If you work from home (either part time or full time) then some portion of the home office expenses may be claimed as a tax deduction. However, if you set up your home office in a room that is shared or has a dual purpose (such as a living or dining room), you can only claim the expenses for the hours you had exclusive use of the area.
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 you carry on your work or business elsewhere (such as an office) but do some work at home occasionally, you cannot claim occupancy expenses even if you have a home office area set aside.
Home office expenses you might be able to claim include:
The table below 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 |
Yes |
No |
No |
Running expenses |
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 |
HOW MUCH CAN I CLAIM?
There’s no maximum amount that you can claim. Provided that the amount you’re claiming is calculated in accordance with the rules, and that you have the necessary substantiation to back up your claim, you can claim whatever you’re entitled to.
Receipts or other written records/evidence
In making home office deductions, ensure that you can substantiate all expenditure claims through receipts of diaries. This includes:
Australian Tax Office rate per hour
As an alternative to keeping such records, you can use a fixed rate of 52 cents per hour for each hour that you work from home to allow for home office expenses. Under this method you can also include the decline in value of office equipment (such as computers and faxes) but not furniture. In this case you are unable to make additional claims for individual items.
The following costs are not deductible as part of home office expenses:
The ATO have implemented a shortcut method to cover the period from 1 March to 30 June 2020. During this time you claim a deduction for $0.80 per hour of documented work, and this covers all deductible running expenses. But note that, if you use this method, you cannot claim any other expenses for working from home for that period.
Examples
Method 1: Actual running expenses
Betty has the following home office running expenses, including energy expenses that have been calculated using electricity authority hourly costs per appliance. The figures are based on four weeks of diary entries.
|
|
Deduction amount – this year $ |
Deduction amount – future years (assuming similar use) $ |
Decline in value of desk |
Value $350 over 10 years |
35.00 |
35.00 |
Decline in value of chair |
Value $150 over 1 years |
150.00 |
Nil |
Electricity for 60W ceiling light |
0.7c per hour for 10 hours per week for 48 weeks |
3.36 |
3.36 |
Electricity for computer |
1c per hour for 10 hours per week for 48 weeks |
4.80 |
4.80 |
Electricity for heating/cooling |
9c per hour for 10 hours per week for 48 weeks |
43.20 |
43.20 |
Total deductible amount |
|
236.36 |
86.36 |
Method 2: Rate per hour
Using this method, Betty is able to use a simple and quick calculation for her expenses: 52 cents per hour for 10 hours per week for 48 weeks = $249.60.
Note: Method 1 gives a greater deduction for Betty this year because of the immediate write-off of a chair costing less than $300. However, Method 2 will allow greater ongoing deductions with a simpler calculation assuming that future use and electricity costs remain similar.
H&R Block offers a Home Office Record Card you can use to keep track of this information. Just ask at your nearest office.
Remember – if you are not sure if you can claim an expense, keep the receipt and we will ensure that we claim all allowable deductions and rebates for you whilst preparing your tax return.
H&R Block can help
Let us lodge your tax return for you.
This information sheet is intended as a guide for H&R Block clients. All actual detail and circumstances differ, please discuss your situation with an H&R Block Tax Consultant. Use one of our Tax saver envelopes to keep all your receipts and documents for the year. Remember – if you are not sure if you can claim an expense, keep the receipt and we will ensure that we claim all allowable deductions and rebates for you whilst preparing your tax return.
H&R Block is Australia’s largest network of tax accountants with over 470 offices. Every year we help thousands of Australians achieve a better taxation result. For your nearest office call 13 23 25.
September 2019
The fast and easy option for completing your tax return within minutes.