The way we work is changing. More and more, we’re demanding flexibility and the ability to construct our own work hours. It’s now common place to work part-time or full-time from home, on the weekend, at night, or to structure our week around child care or family commitments.

The ATO keeps a close eye on the deductions taxpayers claim for working from home. Mistakes are easily made; claiming too high a work-related proportion for an expense, claiming something that shouldn’t be claimed at all or simply not keeping proper records. For example, if you carry out all or part of your employment activities from home, then some portion of your home office expenses can be claimed. However, if you’re using a room with a dual purpose, such as a dining room, or a room shared with others, like a lounge room, you can only claim the expenses for the hours you used the area exclusively.

What Home Office Expenses Can You Claim?

We regularly speak to taxpayers who simply don’t know they can claim a deduction for working from home. This means missing out on deductions we know they’re entitled to. Here are some examples of home office tax deductions:

  • Occupancy expenses such as rent, mortgage interest, rates, land taxes and house insurance premiums (but only in limited circumstances, see below)
  • Home office equipment including computers, printers and telephones. You can claim the full cost (for items up to $300) or the decline in value (for items $300 or more). If you’re self-employed, you may be able to write-off equipment costing up to $20,000
  • Work-related phone calls (including mobiles) and phone rental. Claim a portion reflecting the share of work-related use of the line.
  • 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.

Home office occupancy expenses can only be claimed if your home is also your principal place of business and you’ve set aside a dedicated area for the running of your business. If you work from home occasionally then you can’t claim occupancy expenses – even with a dedicated work at home area.

Check out the table below for the deductions you can claim as well as 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

How to Claim Home Office Tax Deductions

As a general rule, when it comes to home office deductions, ensure you can substantiate all expenditure claims.

Keep a Diary of Your Actual Costs

When it comes to working from your home office, your usage should be recorded in a diary. Over a minimum of four weeks, your diary entries will need to indicate time spent working in the home office. The percentage of home use you arrive at can then be applied to all the costs you may be eligible to claim. To calculate how much you used your equipment, itemised accounts such as phone and internet can identify work-related calls and browsing.

Tax Office Rate Per Hour Method

Alternatively, to keep your records simple, you can allow for home office expenses using a fixed rate of 45 cents per hour for each hour that you work from home. This method incorporates all the items you are able to claim, including the decline in value of office equipment (i.e. computers, faxes, etc.). You can’t make additional claims for individual items.

John Citizen’s Calculations

Method 1: Actual Running Expenses

John’s home office running expenses, including energy, have been calculated using Electricity Authority hourly costs per appliance. The apportionment has been based on a month’s worth of his 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 year 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

This simpler calculation gives John a fast outcome for his expenses – 45 cents per hour for 10 hours per week for 48 weeks = $216.00

At the end of the day, Method 1 gives John a greater deduction because it allows him to immediately write-off of a $280 chair. However, Method 2 is easier to calculate and removes John’s obligations to keep records like power bills, cleaning bills, and a receipt for the cost of the chair..

How To Keep Track of Home Office Expenses

H&R Block offers a home office record card that you can use to keep track of this information. If you’re not sure you can claim an expense, just keep the receipt and we’ll ensure we include all allowable deductions and rebates in your tax return.

If you’re running a small business from home, our bookkeeping service can take the hassle out of managing your books and keep your records reconciled. In between generating turnover, purchasing supplies and managing staff, it can be difficult to keep track of what you can and can’t deduct.

How H&R Block Can Help You Claim Your Home Office Expenses

We can take your tax return off your hands and lodge it for you. We’ll make the most of your home office expenses, so to get claiming:

If you’re running a small business from home, we can help you with your tax and small business accounting.

August 2017

Book an appointment

Let us lodge your tax return for you. Our tax accountants have the knowledge to walk you through the tax refund process with ease. We are committed to offering expert and personal service year-round at a location convenient to you.

Book now

Book an appointment

Let us lodge your tax return for you. Our tax accountants have the knowledge to walk you through the tax refund process with ease. We are committed to offering expert and personal service year-round at a location convenient to you.

Book now