Home office expenses

Home office expenses

It is becoming increasingly popular to work from home either partly or wholly, as employers are becoming more flexible.

If you work from home, you may be able to claim a deduction for expenses you incur relating to that work.

What are home office expenses?

Home office expenses are claimed when you work from home and they are generally split into two broad types, home office running expenses and home office occupancy expenses.

Home office running expenses are claimed when you work from home occasionally. Home office occupancy expenses are claimed when you work from home permanently and on a more regular basis.

Are you missing out on tax deductions? Here are some of the things you can claim:

You can claim a deduction for expenses relating to the following:

Electricity
Equipment (laptop, computer etc.)
Furniture
Phone
Internet

Usually, if you are working from home as an employee there may not be any capital gains tax implications for your home.

It is a good idea to set up a dedicated area to work in from home if you do so often.

What you cannot claim:

You cannot claim a deduction for expenses for costs incurred such as the following:

Coffee, tea, milk etc.
Rent/ mortgage
Water and rates
For the decline in value of items provided to you by your employer, such as a laptop, phone, tablet or printer.
For your children and their education (such as setting them up for online learning)

How do you calculate home office expenses?

There are three different ways to calculate home office expenses and these depend on your circumstances.

1. The shortcut method – this method is only available from 1 March 2020 to 30 June 2021 and was brought in due to COVID-19. You can claim 80 cents per hour for each hour you work from home. If you use this method you cannot claim any of the below expenses as they are already included:

Phone expenses
Electricity and gas expenses
Internet expenses
The decline in value of equipment and furniture

Please always remember to keep a record of the number of hours you have worked from home, such as a diary or a timesheet.

2. The fixed rate method – this method is used for claiming a deduction on additional running expenses you may incur from working from home. The fixed rate is 52 cents for each hour you work from home and includes the following running expenses:

The decline in value of home office furniture such as a desk
Electricity and gas
The cost of repairs to your home office equipment, furniture and furnishings

You cannot include phone, internet or stationery expenses with this method so you will need to calculate your work-related use for such expenses.

You should keep a record of the actual hours you spent working at home for the year and a record of receipts which shows the amount spent on the purchases.

3.The actual cost method – You can claim a deduction for additional running expenses you incur when you work from home. Using the actual expenses method, you work out your deduction from actual costs you incur as a result of working from home. These expenses include the following:

electricity and gas
the decline in value of home office furniture and furnishings
the decline in value of phones, computers or laptops etc.
phone expenses
internet expenses
cleaning (only if you use a dedicated area for working)
Stationery

If you do not have a dedicated work area such as a home office, you will probably only incur minimal additional running expenses. For instance, if you use the lounge room for work and it is being used by other members of your household then you will not be incurring additional costs for lighting, heating etc. as a result of working in that room.

You must keep a record of your actual expenses.