What Tax Deductions Can You Claim When Working From Home?
Business| By Stuart Ridley | May 25, 2020
Whether you’re new to working from home or your home office is well-established, it pays to know what tax deductions you could claim – and how to calculate them.
While many people have had to quickly adjust to working from home during the COVID-19 (coronavirus) epidemic, the good news is you may be able to claim some of your running costs as a tax deduction.
The Australian Taxation Office (ATO) is well ahead of the curve here with updated advice on the rules for employees who have set up a home office as a result of COVID-19 compared to people who have regular home office expenses and/or people whose home is their principal place of business.
Here’s a summary of what could be claimable and ways to calculate your tax deductions while you work from home.
Which Remote Working Expenses Might Be Claimable?
The big question the ATO asks is “How much of this expense is work related?” So, if the expense is eligible, you could claim the work-related proportion for:
1. Running Expenses
- Electricity (lights, power for equipment, heating/cooling)
- Home office equipment and furnishings (including repairs)
- Stationery and office supplies
Note: Until recently you needed a dedicated work area to claim running expenses (see below for update).
2. Phone and Internet Expenses
- You may be able to claim a phone or internet deduction if you use your own phone and/or internet for work purposes.
3. Equipment Decline in Value
- This is called depreciation and could be claimed for computers and other home office equipment. Equipment costs can be complex to calculate so ask an accountant to help. The costs of some tools, equipment and other assets could be claimed as immediate deductions, others will depreciate over a few years.
New Tax Deductions for Home Office Running Expenses
Normally if you’re an employee who doesn’t have a dedicated work area at home you wouldn’t be able to claim much at all for running expenses. In March 2020, the ATO announced new tax deduction rules for employees working from home as a result of the COVID-19 (coronavirus) crisis but:
- You can only claim expenses you’ve paid for – not for anything provided by your employer or if an expense has been reimbursed.
- It must be work-related – directly related to costs incurred while earning your income.
- You’ll need records to prove your tax deductions – at a minimum, four weeks’ worth of records showing the hours you’ve worked at home to claim 80c/hour shortcut for additional running expense (more on this below). If you choose another calculation method for home office expenses, you’ll need receipts.
For more information, download the ATO’s guide for employees working from home.
How to Calculate Your Tax Deductions
Method 1: 80 cents/hour shortcut
A new flat rate of 80 cents per work hour for claiming additional running expenses was introduced in March 2020 for employees working from home due to coronavirus.
If you don’t have a dedicated home office space, you could claim this flat rate. It wraps up traditional running expenses such as electricity and office supplies with phone and internet expenses and depreciation of a computer. But be aware, you wouldn’t be able to make further claims for any of these expenses. Talk with an accountant about whether you might be able to claim more using the fixed rate plus actual expenses method below instead.
Remember: You’ll need to keep at least a four-week work diary (paper or electronic) to prove the hours you worked, showing for each day:
- Time started work
- Summary of work activity
- Time finished work
- Break/s for non-work-related activities
Method 2: 52 cents/hour running costs plus expenses
If you regularly work at home, this method allows you to claim:
- 52 cents per work hour flat rate for general running costs (electricity, cleaning and depreciation of office furniture) – saving you having to calculate the work-related portion.
- Work-related share of actual costs of communications (phones and internet) – you'll need records of all your bills.
- Work-related share of actual costs of office consumables (paper, ink etc.) – you'll need records of these expenses.
- Work-related share of decline in value of tech and other equipment (computers, printers, scanners etc.) – you'll need receipts for each item, plus depreciation calculations (this handy depreciation and capital allowances tool can help).
Remember: You'll also need records of your hours worked at home. Talk with an accountant about ways to manage all your receipts and records.
Method 3: Work-related share of home office expenses
If your home has a dedicated work space or room and you're disciplined about keeping records, you could calculate the work-related share for most or all home office expenses. The Australian Tax Office has a home office expenses calculator and a depreciation and capital allowances tool to help you add it all up. Again, speak with an accountant about what you can and can't claim.
If you are running your own business from home, you may also be able to claim:
See a Tax Professional
This information is general and only summarises basic tax deductions relating to working from home. It does not take into account your individual circumstances. The ATO provides some calculators that may help you, though as tax is a complex subject, see an accountant for individual advice.
* This is general information only and does not constitute taxation or legal advice. Other requirements under the tax law apply. Seek professional tax and/or legal advice to determine whether you are eligible to claim a deduction for any purchases.