The way we work is changing. Increasingly, we demand flexibility in the way we work or run our business and it is now common for people to spend at least some of their time working from home; sometimes at weekends, sometimes at night and sometimes during the day to work around commitments such as child care.
The ATO keeps a close eye on the deductions which taxpayers claim for working from home. It's easy to make a mistake, perhaps by claiming too high a work-related proportion for a particular type of expense, claiming something that shouldn't be claimed at all or simply not keeping records to substantiate the expense. For example, If you carry out all or part of your employment activities from home, then some portion of the home office expenses may be claimed as a tax deduction.
Here at H&R Block, we encounter a number of taxpayers who simply don't know that they can claim a deduction for working from home. Previously, they may have missed out on deductions which we know they are entitled to.
So, what are the rules for claiming expenses when you work from home?
Home office expenses you can claim include:
- occupancy expenses such as rent, mortgage interest, rates, land taxes and house insurance premiums (but only in limited circ*mstances, see below)
- running expenses such as:
- home office equipment, including computers, printers and telephones. You can claim the full cost (for items costing up to $300) or the decline in value (for items costing $300 or more). If you're self-employed, you may be able to immediately write-off equipment
- work-related phone calls (including mobiles) and phone rental. You can claim a portion reflecting the share of work-related use of the line if you can show you are on call, or have to phone your staff, employer, customers or clients regularly while you are away from your workplace
- heating, cooling and lighting
- costs of repairs to your home office furniture and fittings
- cleaning expenses
- computer consumables, stationery, telephone and internet costs claimed on an actual expense basis.
Being able to claim these expenses depends on whether your home is your place of work or business and if you have an area set aside exclusively for work activities.
If your home is indeed your place of work and you have an area set aside exclusively for work activities, you may be able to claim both occupancy and running expenses. If, as is more typical, you carry on your work or business elsewhere (at an office, perhaps) but do some work at home occasionally, you cannot claim occupancy expenses – even if you have a home work area set aside.
The table below shows the deductions you can claim for the three ways you can work at home:
What you can claim | How you work | ||
Home is your place of business or work and you have a home work area | Home is not your place of business but you have a home work area | You work at home but you don't have a home work area | |
Occupancy expenses | Yes | No | No |
Running expenses | Yes | Yes | Yes |
Business phone costs | Yes | Yes | Yes |
Decline in value of office plant and equipment (such as desks, chairs and computers) | Yes | Yes | Yes |
Depreciation of curtains, carpets, light fittings, etc | Yes | Yes | No |
Receipts or other written records/evidence
In making home office deductions, ensure that you can substantiate all expenditure claims through receipts of diaries. This includes:
- receipts for items of equipment you have purchased
- diary entries you make to record you small expenses ($10 or less) totaling no more than $200, or expenses you cannot get any kind of evidence for, regardless of monetary amount.
- diary indicating your running expenses related to working in your home office. Here, you need to detail the time you spend in the home office compared with other users. Keep diary record for a minimum 4 week representative period. This can also include calculations of how much you used your equipment.
- itemised phone accounts from which you can identify work-related calls.
Methods of claiming home office deductions:
Tax Office rate per hour
As an alternative to keeping such records, you can use a fixed rate of 67cents per hour for each hour that you work from home to allow for home office expenses. This method has an allowance for the cost of power and gas, telephone, internet, stationery and computer consumables. If you are using this method, you will not be able to claim any additional amounts for these expenses. This applies even if you have incurred expenses over and above those that relate to working from home (such as work related telephone expenses when you are actually at work or out and about).
The following costs are not deductible as part of home office expenses:
- mortgage or interest costs
- rates and taxes
- depreciation on the home.
Examples
Method 1 (actual running expenses)
Betty has the following home office running expenses, including energy expenses which have been calculated using electricity authority hourly costs per appliance.
| Deduction amount – this year $ | Deduction amount – future years (assuming similar use) $ | ||
| Decline in value of desk | Value $350 over 10 years | 35.00 | 35.00 |
| Decline in value of chair | Value $150 over 1 years | 150.00 | Nil |
| Electricity for 60W ceiling light | 0.7c per hour for 10 hours per week for 48 weeks | 3.36 | 3.36 |
| Electricity for computer | 1c per hour for 10 hours per week for 48 weeks | 4.80 | 4.80 |
| Electricity for heating/cooling | 9c per hour for 10 hours per week for 48 weeks | 43.20 | 43.20 |
| Telephone | $600 per year x 48 weeks / 52 weeks x 40% | 221.54 | 221.54 |
| Internet | $720 per year x 48 weeks / 52 weeks x 25% | 166.15 | 166.15 |
| Stationery | 65.00 | 65.00 | |
| Computer consumables | 185.00 | 185.00 | |
| Total Deductible amount | 874.05 | 724.05 |
To calculate her electricity usage Betty can estimate the number of hours she was working from home based on four weeks of diary entries. She can also estimate her telephone and internet work use percentage based on four weeks of diary records.
Method 2 (rate per hour)
Betty is able to use a simpler and quicker calculation for her expenses: 67 cents per hour for 10 hours per week for 48 weeks = $321.60.In addition to the 67 cents per hour, Betty can claim the decline in value of her desk ($35) and chair ($150), however, she cannot claim her telephone, interent, stationery or computer consumables. Using this method, Betty will have a total claim of $506.60. From 1 March 2023, in order to claim the 67 cents per hour, Betty must have a complete record of the number of hours she was working from home. For the period prior to 1 March 2023, she can estimate the number of hours she was working from home, based on a four week diary record.
Method 1gives a greater deduction in this case based on these expenses.
H&R Block offers a Home Office record card you can use to keep track of this information. Just ask at your nearest office.
Remember – if you are not sure if you can claim an expense, keep the receipt and we will ensure that we claim all allowable deductions and rebates for you whilst preparing your tax return.
H&R Block can help
Let us lodge your tax return for you.
- Find your nearest H&R Block office and book an appointment
- Lodge your tax return online with H&R Block
- Download our tax app to help you track your tax deductible expenses and trips
This information sheet is intended as a guide for H&R Block clients. All actual detail and circ*mstances differ, please discuss your situation with an H&R Block Tax Consultant. Use one of our Tax saver envelopes to keep all your receipts and documents for the year. Remember – if you are not sure if you can claim an expense, keep the receipt and we will ensure that we claim all allowable deductions and rebates for you whilst preparing your tax return.
H&R Block is Australia's largest network of tax accountants with over 400offices. Every year we help thousands of Australians achieve a better taxation result. For your nearest office call 13 23 25.
