Work From Home: Tax Deductions You Can Claim

By H&R Block

9 min read

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.

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 records to substantiate the expense. For example, If you carry out all or part of your employment activities from home, then some portion of the home office expenses may be claimed as a tax deduction. However, if you are using a room with a dual purpose (e.g. dining room), or a room shared with others (e.g. lounge room) you can only claim the expenses for the hours you had exclusive use of the area.

Here at H&R Block, we encounter a number of taxpayers who simply don’t know that they can claim a deduction for working from home. Previously, they may have missed out on deductions which we know they are entitled to.

So, what are the rules for claiming expenses when you work from home?

Home office expenses you can claim include:

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:
- 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
- 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
- heating, cooling and lighting
- costs of repairs to your home office furniture and fittings
- cleaning expenses
computer consumables, stationery, telephone and internet costs claimed on an actual expense basis.

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 indeed 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.

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 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

Methods of claiming home office deductions:

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:

receipts for items of equipment you have purchased
diary entries you make to record you small expenses ($10 or less) totaling no more than $200, or expenses you cannot get any kind of evidence for, regardless of monetary amount.
diary indicating your running expenses related to working in your home office. Here, you need to detail the time you spend in the home office compared with other users. Keep diary record for a minimum 4 week representative period. This can also include calculations of how much you used your equipment.
itemised phone accounts from which you can identify work-related calls.

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 (i.e. computers, faxes, etc.) but not furniture. In this case however, you are unable to make additional claims for individual items.

The following costs are not deductible as part of home office expenses:

mortgage or interest costs
rates and taxes
depreciation on the home.

Examples

Method 1 (actual running expenses)

Betty has the following home office running expenses, including energy expenses which have been calculated using electricity authority hourly costs per appliance. The apportionment has been based on four weeks' 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)

Betty is able to use a simpler and quicker 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.

Find your nearest H&R Block office and book an appointment
Lodge your tax return online with H&R Block
Download our tax app to help you track your tax deductible expenses and trips

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