What home office expenses am I allowed to claim now I’m working from home?
If you work part of all of your job from home, you may be able to claim a deduction for the costs incurred in running your home office in your next Tax Return. Even if the room is not set aside solely for work-related purposes.
Since the outbreak of Coronavirus in Australia, the Australian Tax Office (ATO), has announced unique rules to make it easier for people to claim deductions for those working from home. These new arrangements will allow people to claim a rate of 80 cents per hour for all running expenses, rather than needing to calculate costs for specific expenses (for example, internet, electricity etc).
Good news is, a number of people living in the same house can claim this new rate. For example, a couple living together and working, could each individually claim the 80 cents per hour rate. The requirement to have a dedicated work from home area has also been removed.
This new shortcut does not prevent people from making a working from home claim under existing arrangements (where you calculate all or part of your running expenses).
Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method and must use the preexisting working from home approach and requirements.
What happens post 30 June? The ATO will review the special arrangement for the next financial year as the Coronavirus situation progresses.
WORKING FROM HOME CLAIMS FOR 1 MARCH TO 30 JUNE
There are three ways you can choose to calculate your additional running expenses for the 1 March – 30 June period:
- claim a rate of 80 cents per work hour for all additional running expenses.
- 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.
- claim the actual work-related portion of all your running expenses, which you need to calculate on a reasonable basis.
Note: The ATO has stated the three golden rules for deductions still apply. These are:
- you must have spent the money yourself and not been reimbursed,
- it must be directly related to earning your income and
- you must keep records to prove it.
WORKING FROM HOME BEFORE 1 MARCH 2020?
Any claims related to working from home prior to 1 March 2020 should be calculated using existing approaches and requirements.
A deduction can be claimed for home office expenses including 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, diary/logbook evidence should be maintained 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 (for example, you work in a room where others are watching TV), or the income producing use of the home is incidental (for example, 52c per hour would not be allowed for a fax machine permanently left on to receive documents).
You will need receipts for:
- home office equipment used for work purposes.
- repairs relating specifically to the home office or furniture and equipment used for work purposes.
- cleaning expenses of 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.
PHONE & INTERNET COSTS
If work or business calls can be identified from an itemised phone 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.
Phone rental expenses may be partly deductible if you are “on call” or required to contact your employer or client on a regular basis.
DEPRECIATION ON EQUIPMENT
Depreciation on home office equipment including office furniture, carpets, computer, printer, photocopier, scanners, modem used only partly for work or business purposes can be apportioned.
The claim is based on a diary record of the income related and non-income related use covering a four-week period. The diary needs to show:
- The nature of each use of the equipment
- Whether that use was for an income producing or non-income producing purpose
- The period for which is was used
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.
Note: 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.
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