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
Depreciation of home office furniture and fittings
Depreciation of office equipment and computers
Costs of repairing home office equipment, furniture and furnishings
Computer consumables (like printer ink) and stationery
Phone (mobile and/or landline) and internet expenses
Costs of cleaning your home working area (including cleaning products or payment for a domestic cleaner if required)
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)
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 do I claim?
Shortcut Methods
The ATO has introduced a temporary “shortcut method” of calculating additional running expenses allowing those working from home to claim a rate of 80 cents per work hour during the period of the COVID-19 crisis. This will apply from 1 March 2020 until 30 June 2022.
You will need to keep a record of the number of hours you have worked from home as a result of COVID-19.
If you use the 80 cents per hour method, you can make no other claims in relation to working from home. So, items like mobile phone and internet usage are included in the 80 cent rate.
Alternatively, you can claim the ATO’s existing flat rate allowance for working from home of 52 cents per hour. This covers the extra costs of heating, cooling, lighting and the decline in the value of the furniture. All you need to do to claim this is to keep a diary – note the time you start work each day, the time you finish work each day and any breaks. You can then claim 52 cents per hour for each working hour.
In addition, (and this is what makes this rate different to the temporary 80 cent rate) you can also make separate claims for the work-related proportion of items such as your home internet, mobile phone costs and other expenses that directly relate to your work such as stationery and printer ink. These additional costs often make this a preferred method since the size of the claim is often much larger than using the 80 cent rate.
A further option is to claim the actual costs you’ve incurred. You’ll need to keep a diary of your work from home hours (for a typical 4 week period) and you’ll also need to work out the amount of your home (by floor area) that you’re using as your work space. From this, you can then work out the work-related proportion of your household expenses and apply this percentage to the actual amount you spend on electricity, gas, water, phone and internet, etc. You’ll also need to keep all the original bills to prove your claim.
This generally produces a bigger claim than either of the flat rate methods but the amount of paperwork and calculation involved is much greater. Your tax agent will be able to give you advice on which method to use.
What about the future?
The ATO’s temporary short-cut method of claiming working from home expenses (80 cents per hour flat rate) ends on 30 June 2022. This means that for 2022-23 tax returns, you must use either the 52 cents per hour flat rate or the ‘actual costs’ method.
This means it is vital to start keeping records of your mobile phone bills, home internet, etc. from the start of the financial year. Detailed invoices will be required to substantiate your claim and a four-week diary will be required to prove the work/personal use split.
What about rent and/or mortgage interest?
So-called “occupancy expenses” can’t be claimed. These include things like mortgage interest (for homeowners), 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 are actually running 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 the 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 can you 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
What can you claim
How you work
Home is your place of business or work and you have a home work area
Occupancy expenses Cost of owning or renting the house
Yes
Running expenses Cost of using a room (such as gas or electricity)
Yes
Business phone costs
Yes
Decline in value of office plant and equipment (such as desks, chairs and computers)
Yes
Depreciation of curtains, carpets, light fittings, etc.
Yes
Home is not your place of business but you have a home work area
Occupancy expenses Cost of owning or renting the house
No
Running expenses Cost of using a room (such as gas or electricity)
Yes
Business phone costs
Yes
Decline in value of office plant and equipment (such as desks, chairs and computers)
Yes
Depreciation of curtains, carpets, light fittings, etc.
Yes
You work at home but you don’t have a home work area
Occupancy expenses Cost of owning or renting the house
No
Running expenses Cost of using a room (such as gas or electricity)
Yes
Business phone costs
Yes
Decline in value of office plant and equipment (such as desks, chairs and computers)
Yes
Depreciation of curtains, carpets, light fittings, etc.
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
