An Empire Guide to Claiming Work from Home Expenses

Posted 31 Jul

The major shift to more remote work has brought our offices into our homes, transforming how we manage our professional lives. With this change comes the chance to claim certain expenses incurred during your time working at home.

It’s important to keep in mind that the Australian Taxation Office (ATO) has become more strict on these deductions, so it's crucial to understand the rules and keep accurate records. This guide is here to help you, understand what is required when you claim home office expenses on your tax returns.

By following these tips, you can maximise your tax return and stay compliant with tax regulations!

Eligibility Criteria

To claim work-from-home expenses, you need to meet the following criteria:

Work from home to fulfil your employment duties: You must be working from home to carry out your job responsibilities. This needs to be more than just performing minimal tasks, such as occasionally checking emails or taking calls.

Incur additional running expenses: You must incur additional costs due to working from home.

Keep records: You must have records showing that you actually pay for these expenses and how you calculate your work from home claim.

Running Expenses

When you work from home, you incur additional costs for using facilities within your home. These expenses must be directly related to your work and can include:

• Electricity or gas for heating, cooling, and lighting
• Internet and data expenses
• Phone bills
• Stationery and office supplies
• Depreciation of office furniture and equipment
• Repairs and maintenance of office assets

Expenses you Cannot Claim

 As much as we'd love to claim everything under the sun, some expenses just don't make the cut, including:

• General household items like coffee, tea, and milk
• Costs related to children's education
• Items provided by your employer
• Expenses reimbursed by your employer

As an employee working from home you generally are not entitled to claim occupancy expenses such as rent, interest on home loan repayments, rates, water or insurance.  For some home based businesses, you may be able to claim occupancy expenses but in doing so there would most likely be capital gains tax implications for your home.

Methods to Calculate your Claim

Starting from 1 July 2022, you can use one of two methods to calculate your work-from-home expenses

Fixed Rate Method

Calculation

You can claim 67c for each hour you work from home during the relevant income year. The rate includes the additional running expenses you incur for:

•          home and mobile internet or data expenses
•          mobile and home phone usage expenses
•          electricity and gas (energy expenses) for heating, cooling and lighting
•          stationery and computer consumables, such as printer ink and paper.

The rate per work hour (67c) includes the total deductible expenses for the above additional running expenses. If you're using this method, you can't claim an additional separate deduction for these expenses.

Under this method, if you incur costs for technology and office furniture such as chairs, desks, computers, bookshelves you can claim these in addition to the fixed rate above.  These would most commonly be depreciated over a number of years unless they cost less than $300 per item.

Record Keeping Requirements

 To claim your working from home deduction using this method, you must keep:

• a record of the number of actual hours you work from home during the entire income year – for example, a timesheet, roster, diary or other similar document (an estimate of your hours won't be acceptable)
• at least one record for each of the additional running expenses you incur that the rate per work hour includes – for example, if you incurred electricity and stationery expenses keep one quarterly bill for your electricity expenses and one receipt for your stationery expenses

You need to keep your records for 5 years (in most cases) from the date you lodge your tax return.

You must keep records for depreciating assets from the time you buy them, that shows:

• the amount spent on depreciating assets you buy
• the percentage of the year you use your depreciating assets exclusively for work, such as a diary or similar document.

You must also keep these records for other running expenses you are claiming as a separate deduction.

You need to keep these records for 5 years from the date of your last claim for decline in value.

Actual Cost Method

Calculation

Under the actual cost method you claim the actual expenses you incur from working at home at the relative work related used percentage. This includes expenses such as:-

• Decline in value of assets such as office furniture, phone, computer, laptops etc
• Electricity and gas (energy expenses) for heating, cooling and lighting
• Home and mobile phone, data and internet expenses
• Stationery and computer consumables, such as printer ink and paper
• Cleaning your dedicated home office.

Record Keeping Requirements

To claim your work from home expenses using actual costs, you must keep a record showing either

• the number of actual hours you work from home during the entire income year – for example, a timesheet or spreadsheet; or
• a continuous 4-week period that represents your usual pattern of working at home – for example, a diary.

 You need to keep your records for 5 years (in most cases) from the date you lodge your tax return.

 You must keep records for depreciating assets from the time you buy them, that shows:

• the amount spent on depreciating assets you buy
• the percentage of the year you use your depreciating assets exclusively for work, such as a diary or similar document.

 You need to keep these records for 5 years from the date of your last claim for decline in value.

 You must also keep records that show:

• the additional running expenses you incurred while working from home, such as receipts, bills and other documents; and
• how you worked out the amount of your deduction.

Conclusion

In previous years, there were different rates and methods available, like the fixed-rate method at 52 cents per hour and the shortcut method at 80 cents per hour. However, these older methods are no longer applicable.

Navigating the specifics of claiming work-from-home expenses is key to ensuring you get the deductions you deserve. By following the guidelines and picking the right method, you can accurately claim your expenses and potentially lower your taxable income.

Take the time to review your work-from-home expenses, choose the best method for calculating your deductions, and keep detailed records to maximise your tax return. If you need a helping hand, don't hesitate to reach out to Empire Accountants.

We're here to make sure you get every deduction you're entitled to Contact us today!