What Home Office Expenses Can I Claim?
How do the Home Office deduction rules work?
WORKING FROM HOME DEDUCTIONS
There are three ways that you can choose to calculate your additional running expenses for the 1 July to 30 June period:
Shortcut Method – you can claim a rate of 80 cents per work hour for all additional running expenses.
Fixed Rate Method – you can claim a rate of 52 cents per work hour for heating, cooling, lighting, cleaning and the decline in value of office furniture, plus calculate the work-related portion of your phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device
Actual Cost Method – you claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.
The ATO has stated that the three golden rules for deductions still apply.
Taxpayers must have spent the money themselves and not have been reimbursed
the claim must be directly related to income earned, and
there must be a record of you spending the amount to substantiate the claim.
The shortcut method, which was brought in by the ATO to help people during COVID, was meant to end on 30 June 2022. This means we are assessing this as an option to making your claim, however, using this method means we are NOT able to claim things like Internet or home Telephone expenses.
Overall, the method that we find gives the best result with the minimal amount of proof and work required on your behalf is the Fixed Rate method.
RUNNING EXPENSES
A deduction can be claimed for home office running expenses comprising of electricity, gas and depreciation of office furniture (e.g. desk, tables, chairs, cabinets, shelves, professional library) in the amount of:
The actual expenses incurred; or
52 cents per hour
Like making a motor vehicle claim, a diary or logbook evidence should be kept. For Home Office expenses it should be kept for a 4-week period to establish a pattern of working from home and justify the number of hours you are claiming.
No deduction is allowed where no additional costs are incurred e.g., you work in a room where others are watching TV, or the income producing use of the home is incidental e.g. 52c per hour would not be allowed if you left your computer permanently left on to receive emails as they came through.
You will need receipts for:
Any home office equipment used for work purposes that you have purchased
repairs relating specifically to the home office or furniture and equipment used for work purposes
cleaning expenses of the home office
any other day-to-day running expenses for the home office
diary entries to record your small expenses ($10 or less) totalling no more than $200
TELEPHONE (INC. MOBILES) + INTERNET COSTS
If work or business calls can be identified from an itemised telephone account, then the deduction can be claimed for the work or business-related portion of the telephone account. A representative four-week period will be accepted as establishing a pattern of internet and telephone use for the entire year.
Telephone rental expense may be partly deductible if you are “on call” or required to contact your clients on a regular basis.
OCCUPANCY EXPENSES
Claims for occupancy expenses are allowed only if the home is used as a place of business. Occupancy expenses include rent, mortgage interest, water rates, repairs, house insurance premiums.
The claim can be made as an apportionment of total expenses incurred on a floor area basis.
Warning: Being able to claim theses expenses may affect your ‘main residence exemption’ for capital gains tax purposes if you sell your house in the future.
WHEN IS A HOME
A PLACE OF BUSINESS?
The following factors, none of which is necessarily conclusive on its own, may indicate whether, or not, an area set aside has the characteristics of a place of business:
the area is clearly identifiable as a place of business
the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally
the area is used exclusively, or almost exclusively, for carrying on a business, or
the area is used regularly for client or customer visits.
If you use your home to carry out income producing activities as a matter of convenience, you are not entitled to a deduction for occupancy expenses. It would be rare for an employee to be able to claim occupancy expenses.
NEXT STEPS
For further information and expert assistance with this – please contact Jae at our office. She will be able to answer any questions about this that you may have