Working from home – deductible home office expenses

If you're an employee who works from home regularly or if you're an employee and are temporarily required to work from home due to recent events, such as Coronavirus, bush fire and drought, you may be able to claim a deduction for additional home expenses incurred.

These are generally home office running expenses, and phone and internet expenses. You can also claim the work-related proportion of the decline in value of office equipment.

If your home is your principal place of business, you may also be able to claim occupancy expenses.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home. However, CGT may apply if you are running a business from home or claiming occupancy expenses (like mortgage interest payments or rates).

Expenses you can claim

The table below details the expenses which can claimed depending on the circumstances;

Note 1: Generally, an employee who works at home and who does not have a dedicated work area will not be entitled to claim running expenses or their claim for running expenses will be minimal. This is because they can only claim the additional running expenses incurred as a result of working from home.

Running expenses

If you work from home, you can claim the work-related proportion of your running expenses. However, only the additional running expenses incurred as a result of working from home are deductible.

Record keeping

To claim any running expenses a record of the number of actual hours worked from home during the income year will need to be maintained. Or a diary (log book) will need to be maintained for a four-week period to show your usual pattern of working at home

If you use the four-week representative period to calculate your usage over the income year and your usual pattern of work changes, you will need to keep separate records to show your usage.

For example, if you usually work from home one day a week and due to an emergency situation such as Coronavirus, bush fire or drought you're required to work from home for an extended period, you will need to keep records for both the actual hours you’ve worked from home due to the emergency situation and your usual working from home arrangements.

There are two ways to calculate your running expenses:

Fixed rate

You can claim a deduction of 52 cents for each hour you work from home.*

Under this fixed rate method, actual records of heating, cooling, lighting, cleaning, and the decline in value of furniture are not required to be maintained.

This rate is based on average energy costs and the value of common furniture items used in home business areas.

Other home work area expenses, such as telephone and internet, stationery and depreciation of office equipment can then be worked out separately.

Actual expenses

If you have a dedicated work area, you can claim additional running costs and the decline in value of office furniture used in the area for work purposes.

To calculate actual expenses for your dedicated work area, in addition to maintaining a 4 week diary, or recording the actual hours worked in the home office, you must maintain the following records;

  • receipts showing the amount you spend on any home office furniture, and work out the percentage of the year you used those depreciating assets exclusively for work.

  • records of the cost of your cleaning expenses, repairs to home office equipment, heating, cooling and lighting etc.

These costs will then need to be apportioned to reflect the home office use component. This can be done by apportioning costs based on the floor area of your dedicated work area, the cost per unit of electricity used or the total annual hours used for work-related purposes.

These calculations must also take into account private use of the home office.

Occupancy expenses

Employees are generally not able to claim occupancy expenses. Occupancy expenses generally include rent, mortgage interest, property insurance, council rates.

You can only claim the work-related proportion of your occupancy expenses in two very limited circumstances where:

  • the space in the home is a place of business, and not suitable for domestic use – for example, a doctor or dentist surgery or a hairdresser studio in the home

  • no other work location is provided to an employee by an employer and the employee is required to dedicate part of their home to their employer's business as an office – you can claim the portion of these costs that relate to a clearly identified place of business.

If you claim occupancy expenses, you don't qualify for the capital gains tax (CGT) main residence exemption for the part of your home that you use for work, and so there may be CGT implications when you sell it.

If you are eligible to claim occupancy expenses, you can work them out by calculating the:

Total expenses × floor area × percentage of year that part of your home was used exclusively for work

Home office equipment and stationery

The work-related portion of your home office equipment and consumables, including computers, printers and stationery can also be claimed.

Receipts supporting the cost of these items will need to be kept, and a deduction can then be claimed for the proportion which reflects your work-related use of the asset and stationery.

A deduction can be claimed for home office equipment costing up to $300, assets exceeding $300 must be depreciated over their effective life.

Phone and internet expenses

A deduction for the work-related proportion of your phone and internet expenses can be claimed. You must have paid for these costs and have records to support any claim.

There are two ways to calculate your phone and internet expenses:

Claim up to $50

If your work use is incidental and you are not claiming a deduction of more than $50 in total, you may make a claim based on the following, without having to analyse your bills. The rates you can use to work out the cost for your work calls are:

  • 25 cents for calls made from your landline*

  • 75 cents for calls made from your mobile*

  • 10 cents for text messages sent from your mobile.*

Actual expenses

If claiming a deduction of more than $50, you must keep usage records for a four-week representative period in each income year. These records include phone and internet bills.

If an itemised bill is available, the work use percentage must be determined using a reasonable basis, for example; the number of work calls made as a percentage of total calls, the time spent, or data used for work purposes compared to your private usage and that of all members of your household.

If an itemised bill is not available, or if you have a bundled plan, the plan costs must be apportioned between the services provided, and your work use percentage must be applied to each service.

* Rates are current at time of posting.

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