Tax guide to working from home

By H&R Block 7 min read

Can I claim a deduction for working from home expenses?

If you work from home, you can claim a tax deduction for the work-related proportions of household costs such as:

  • Heating, cooling and lighting bills

  • Costs of cleaning your home working area (including cleaning products or payment for a domestic cleaner if required)

  • Depreciation of home office furniture and fittings

  • Depreciation of office equipment and computers

  • Costs of repairing home office equipment, furniture and furnishings

  • Small 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)

  • Computer consumables (like printer ink) and stationery

  • Phone (mobile and/or landline) and internet expenses


How do I claim?

The revised fixed rate method applies from 1 July 2022 onwards. The amount of the fixed rate is 67 cents per hour.  


What’s covered by the rate

The revised fixed rate of 67 cents per work hour covers:

  • energy expenses (electricity and gas)

  • phone usage (mobile and home)

  • internet

  • stationery and computer consumables. 

No additional deduction for any expenses covered by the rate can be claimed if you use this method. 

For the first time, phone usage and internet expenses are included in the fixed rate method. These were previously excluded from the fixed rate method, which allowed a separate deduction to be claimed for these expenses. Note that under the new rules, if you use your mobile phone for work purposes when you are out-and-about, as well as at home, you can no longer claim a separate deduction for this use and still use the fixed rate method. If you wish to claim actual use of your mobile phone (or home internet), you must claim using the actual method for all working from home expenses (see below).


What can be claimed separately 

  • The decline in value of assets used while working from home, such as computers and office furniture. 

  • The repairs and maintenance of these assets.

  • The costs associated with cleaning a dedicated home office. 

Compliance and substantiation

The biggest burden of the new fixed rate is the amount of substantiation required to claim.

You need to keep a record of all the hours worked from home for the entire income year. This obligation kicks in from 1 March 2023. Before then, a 4-week representative diary or similar document will be required for the period 1 July 2022 to 28 February 2023.

The ATO won’t accept estimates, or a 4-week representative diary or similar document for any period after 1 March 2023. 

Records of hours worked from home can be in any form provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year. 

In addition, records must be kept for each expense that you have incurred which is covered by the fixed rate per hour (for example, if you use your phone and electricity when working from home, you must keep one bill for each of these expenses).


Actual cost method 

The actual cost method hasn’t changed. You can claim the actual work-related portion of all running expenses. 

Compliance obligations include keeping detailed records for all the working from home expenses being claimed, including: 

  • all receipts, bills and other similar documents to show you have incurred the expenses, a record of the number of hours worked from home during the income year (either the actual hours or a diary or similar document kept for a representative 4-week period to show the usual pattern of working at home). 

  • a record of how you have calculated the work-related and private portion of the expenses (for example, a diary or similar document kept for a representative 4-week period to show the usual pattern of work-related use of a depreciating asset such as a laptop). 

Many taxpayers find the substantiation requirements involved in claiming the actual cost method burdensome and time consuming, hence the popularity of the fixed rate. But now, the fixed rate comes with its own burdensome compliance obligations, which is bound to prevent many taxpayers from claiming at all.


What about rent and/or mortgage interest?

So-called “occupancy expenses” can’t be claimed. These include things like mortgage interest (for home owners), rent, rates and home insurance. That’s because these are “fixed” costs and they don’t change simply because you are working from home.

The exception to that rule is where you actually run your business from home. That could mean someone whose business is based at home (like a hairdresser who uses a room as a salon) or someone who carries out their business at clients premises but uses home as a base for administration, storage, etc (like an electrician who works at customer’s premises but stores tools at home and has an office to handle the paperwork).

If that’s the case, a portion of your occupancy costs can be claimed. Note however that people who run a business from home may lose part of the Capital Gains Tax exemption on their home for the part of the home that is used in their business.


What can I claim?

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


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.

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