What tax deductions can I claim working from home?
According to the Australian Taxation Office, there are three ways to claim your home office running expenses.
The actual cost method
Under this method, your tax deductions include the actual costs of work-related expenses. This applies to things such as the costs of your home office furniture and fittings, as well as equipment such as computers and desks.
If the cost of depreciable home office items is less than $300 you may claim the full cost of these items as a tax deduction. If the cost of depreciable home office items is over $300, you may claim a deduction for the depreciation of these items.
If you regularly phone your employer or clients while you are away from your usual place of work, you can also claim a full tax deduction for the work-related portion of the phone calls you make at home and the cost of renting your phone.
Other costs you can claim a deduction for under the actual cost method include:
- Internet access charges.
- Printer and printer cartridges.
- The cost of heating, cooling and lighting your home office, over and above the amount you would ordinarily pay if you did not work from home.
- Any repairs to your home office furniture and fittings.
As your home isn’t considered to be a place of business, you can’t claim non work-related expenses under this method. This includes rent, the interest you pay on your mortgage and the cost of any insurance premiums.
The fixed cost method
Under this method, instead of tax deductions relating to the work portion of costs incurred at home, you can claim a rate of 52 cents per hour for expenses such as heating, lighting and cooling, come tax time. You can also apply the same rate when claiming a depreciation of home expenses, for example any furniture you’re now using in your home office.
The shortcut method
At the moment a special method, known as the shortcut method, is available to people working from home to claim work-related expenses as tax deductions. Please note however, that the special rate is only available from 1 March 2020 to 30 June 2020.
Under this method, each person in a household can claim expenses based on a rate of 80 cents an hour. So more than one person in a household – flatmates or members of the same family – can each claim a deduction for their expenses incurred that directly related to working from home. All that’s required to do so, is keeping a log of the hours you work.
The 80 cents per hour shortcut method seems like an easy way to work out your home office expenses come tax time. However, the risk for people using this method is that they won’t claim as much as they are entitled to under the other two methods. You also can’t claim the cost of equipment such as webcams and office furniture, as well as stationery or computer consumables like printer cartridges.
Whichever method you choose, it’s a good idea to keep accurate records of all your actual expenses, plus the hours you have worked. That will allow you to choose the best method when you or your tax agent prepares your tax return.