With many employees putting in extra hours in the evening and at weekends, and many employers moving to flexible working environments where an office space isn’t necessarily provided, it’s becoming increasingly common for people to work either partly or wholly from home.

If you’ve set up a home office in your study or converted a spare bedroom into a work space, you need to be aware of the potential tax deductions you can claim when you come to complete your 2017 tax return in a few weeks time. Here’s my list of the top five deductions you could be eligible for. 

Heating, cooling and lighting bills

You have to heat your home office in the winter and keep it cool during the summer. You also need light to see what you’re doing! That means that you can claim a proportion of the various household utility bills which relate to the time you spend working in your home office. You can’t claim for periods where the home office space is being used for other purposes and nor can you claim for the element of your bills that relates to the rest of your home.

Depreciation of home office furniture and fittings

If you kit out your home office with furniture such as desks, shelving and cupboards, you can claim a deduction for the decline in value of that furniture to the extent that it relates to your work activity. That’s likely to lead to a write-off of the cost over a period of several years (the “effective life” of the asset).

Depreciation of office equipment and computers

Similarly if you purchase items of technology for use in your home office, you can depreciate them over their life and claim a deduction each year for the work-related element. That might include:

  • Computers
  • Laptops
  • Tablets
  • Mobile phones
  • Printers

Low-cost capital items

Capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately (they don’t need to be depreciated). That could include some of the cheaper tablets and mobile phones, as well as many printers.

Other items

Make sure you claim for the work-related proportion of other costs such as:

  • Computer consumables (like printer ink)
  • Stationery
  • Telephone and internet costs
  • Cleaning costs

What you can’t claim

Many people try to claim a percentage of rent or the interest on a mortgage if they work from home using a home office. This isn’t allowable.

Ideally, you should have a specific room set aside as a home office. 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.

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.

Making your claim

Ideally, you should have a specific room set aside as a home office. 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.

There are two methods you can use to calculate a claim:

Diary method/actual running expenses

Keep a diary to work out how much of your running expenses relate to doing work in your home office or other workspace. The diary needs to detail the time you spend in the home office compared with other users of the home office. Keep your diary record for a representative four-week period. The ‘work-use proportion’ you come up with over that four week period can then be applied to all your actual expenditure over the course of the year. Of the two methods this usually produces the larger deduction but the record-keeping requirements are more stringent.

You’ll also need to work out how big your home office is compared to the rest of your house (using floor area as a guide). This will enable you to work out the split between costs which relate to the office and costs which are domestic in nature.

ATO rate per hour 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.

Finally, a word of warning: It is quite common for people to have insufficient documentation to support a home office claim, particularly around the proportionate split between business use and personal use so be sure to keep records. 

Book a tax return 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.

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Book a tax return 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