You can claim tax deductions for expenses while working from home if you do job duties from home, and are not just doing minimal tasks like checking emails or taking calls. These must be additional expenses for which you’re not reimbursed by your employer.
The kinds of costs you can claim are running expenses, including internet and phone costs, the decline in value of office furniture and furnishings, and electricity expenses for heating or cooling and lighting. You can, in limited circumstance, claim occupancy expenses if you’re essentially forced to allocate part of your home for work.
If you instead run a home-based business, more deductions may be available. You may be able to claim additional occupancy costs, a broad range of running expenses, and motor vehicle trip expenses.
Let’s identify for ATO tax purposes, the different types of expense you can claim when you submit your tax return. We’ll also explain the calculation methods when claiming a deduction.
What Working from Home Means from an ATO Perspective
For the Australian Taxation Office (ATO), working from home means an individual is required by their employer to work from their home on a regular and ongoing basis. Ideally, you’ll have a dedicated home office or work area, and your work-from-home arrangement is not just occasional or infrequent.
To claim tax deductions for working from home expenses, you should be able to demonstrate that they’re directly related to earning your income. And, obviously, the expenses haven’t been reimbursed by your employer.
Deductible Home Office Expenses You Can Claim
When working from home, individuals can claim tax deductions for a range of expenses that are directly related to earning their income. These work-from-home expenses can include:
Additional running costs of the home
- Home office cleaning expenses
- Increased electricity and gas consumption for lighting, heating and cooling the home office
- Internet expenses
Decline in value of depreciating assets
- Assets used for work purposes, such as laptops, tablets, and other electronic devices
- Assets with a limited effective life, such as office equipment, furniture, and computers
Decline in value of office furniture and equipment
- Office equipment such as computers, monitors, printers, scanners and peripherals
- Office furniture such as desks, chairs, and bookcases
- Software used for work purposes
- Stationery and office supplies
Home office expenses
- Depreciation of home office assets
- Rent or mortgage interest, if you own your home
- Repairs and maintenance
Phone and internet expenses
- Costs of additional phone or internet usage if you have a separate work and personal service
- Costs of installing and maintaining a phone and internet service specifically for work purposes
The expenses should be directly related to earning income and incurred as a result of working from home. Also, you will need to keep records, such as receipts, to support these claims.
Deductions If You Run a Home-Based Business
If you run a home-based business, you may be able to claim additional expenses as tax deductions beyond those that an individual who is just working from home can claim. These business expenses can include the following.
- Advertising and marketing. Expenses incurred to promote and market your business, such as website design and hosting, brochures, and business cards.
- Cleaning expenses for the dedicated business space. The cost of cleaning supplies and services for the area of your home that is used exclusively for your business.
- Depreciation of assets used in the home-based business. These can include office equipment and furniture, such as computers, printers, and office desks. The decline in value of these assets can be calculated using the ATO’s “diminishing value method” and claimed as a tax deduction.
- Home office. Expenses from running a dedicated business space in your home, such as rent, mortgage interest, insurance, repairs, and maintenance of the business space.
- Motor vehicle. Cost of fuel, oil, repairs, and insurance if you use your car for business purposes. You need to keep records of your business use, such as a log book, to support your claim.
- Phone and internet. If you use your phone or internet connection for business purposes, you can claim a portion of the expenses as a tax deduction. It is important to keep records of your business usage to support your claim.
- Professional fees. Accounting, legal and consulting fees that you incur in running your business.
- Travel. If you need to travel away from your home-based business for business purposes, such as attending a trade show or meeting with clients, you can claim the cost of travel, accommodation, and meals as a tax deduction.
All the expenses should be directly related to the home-based business. You’ll need to keep records, such as receipts, to support these claims.
Actual Cost Calculation Method
The actual cost method allows you to claim a deduction for working from home expenses. Eligibility for this method requires that you incur additional running expenses and keep records, such as receipts, to show the amount spent on expenses and depreciating assets.
You must show the percentage of work-related use for these expenses and assets.
To claim your deduction, calculate your actual expenses, including the decline in value of depreciating assets, cleaning expenses, heating, cooling and lighting costs, phone, data and internet expenses, and computer consumable and stationery costs.
You must also keep records of the number of hours you work from home during the year or for a representative 4 week period, and keep all receipts and bills showing additional running expenses incurred.
The ATO app’s myDeductions tool can be used to keep track of expenses and receipts throughout the year. Additionally, you can use the ATO’s Home office expenses calculator to help you calculate your deduction.
Fixed Rate Calculation Method
The fixed rate method is a way for individuals to calculate their deduction for expenses incurred while working from home. To be eligible, you must have a dedicated work area, such as a home office, and incur additional running expenses due to working from home.
You must keep records of the number of hours worked at home, as well as receipts and other evidence of expenses incurred.
Under the fixed rate method, individuals can claim 52 cents per hour worked from home, which includes expenses such as the decline in value of home office furniture and furnishings, electricity and gas for heating and lighting, and cleaning expenses. Additionally, individuals can claim the work-related portion of expenses such as phone, internet, and computer consumable expenses if they incur these while working from home.
To claim the work-related portion of expenses, individuals must keep records of the number of hours worked at home, receipts and other evidence of costs, and a diary of their work-related use of phone, internet, and depreciating assets. You can use the ATO’s myDeductions tool to help keep track of costs throughout the year.
When it comes to completing your tax return, individuals should enter their calculated deduction amount under “Other work-related expenses.”
Claim Up to $300 Without Receipts
According to the Australian Taxation Office (ATO), you can claim a maximum of $300 in work-related expenses without receipts.
If you’re claiming a deduction for work-related expenses that’s less than $300, you don’t need to provide receipts. You should, however, be able to provide other records or evidence if required.
You could, for example, show the amount of the expense, the nature of it, and that the expense was incurred in earning your assessable income. Evidence could include diary entries, bank statements, or other written evidence that shows the expense was incurred.
It’s always a good idea to keep receipts anyway as they’re the most reliable form of evidence for the Australian Taxation Office (ATO) in case of an audit.