With the rise of remote work, the need to grasp the nuances of claiming deductions for home office expenses has never been more critical. Yet, amid this shift, numerous individuals still lack awareness regarding the tax implications and potential deductions tied to working remotely.
However, understanding these details is crucial for maximising your financial benefits and ensuring compliance with tax regulations. Whether you’re a seasoned remote worker or new to the concept, figuring out home office deductions can feel overwhelming.
In this blog, we’ll dive into the specifics of what expenses you can deduct, how to accurately calculate your deductions, and what documentation you need to support your claims.
Can I claim home office costs?
To determine if you can claim home office costs, it’s crucial to assess your eligibility based on specific criteria. An individual employee can claim work from home deductions if they: meet the following conditions:
- Work-Related Expenses: The expenses you’re claiming must be directly related to your work duties.
- Out-of-Pocket Expenditures: You must have incurred the expenses using your own funds, without reimbursement from your employer.
- Documented Evidence: It’s essential to keep proof of your expenses, such as invoices and payment receipts, to support your claim.
Work From Home Deductions: Which Expenses Aren't Deductible?
Business owners operating from home and utilising a dedicated workspace enjoy a broader spectrum of claimable expenses. However, for employees working remotely, the scope of deductions is more limited. Here’s what you CANNOT claim as an employee:
- Occupancy Expenses: Such as rent, mortgage interest, capital gains tax, water rates, land taxes, and home insurance premiums.
- Personal Household Items: This includes everyday items like coffee, tea, milk, and general household supplies.
- Child Education Expenses: Costs related to your children’s education, such as iPads, tablets, desks, or subscriptions for online learning, are not deductible.
- Employer-Provided Items: If your employer provides items like a laptop or a mobile phone for work purposes, you cannot claim expenses associated with them.
- Reimbursed Expenses: Any expenses for which your employer reimburses you cannot be claimed as deductions.
What can be claimed for work from home?
If your home is not a place of business (i.e. you are an employee working from a home office), then you are generally limited to claiming certain expenses only. However, there are specific home office running expenses you may be eligible to claim, including:
- utilities such as heating, cooling and lighting;
- electricity and gas;
- phone and internet;
- cleaning costs;
- stationery consumables such as printer ink, paper and pens;
- depreciation (the decline in value) on home office equipment such as computers, furniture and printers.
How do I calculate my tax deduction for working from home?
From 1 July 2022 there are two (2) methods available to calculate working from home deductions:
- Revised fixed rate method
- amount per work hour for additional running expenses
- separate amount for expenses not covered by the revised fixed rate, such as the decline in value of depreciating assets
- no longer need a dedicated home office.
- Actual cost method
- the actual expenses you incur as a result of working from home.
You must keep records to show you incur expenses as a result of working from home. The type of records you need to keep will depend on the method you choose to calculate your expenses.
What is 67c work from home?
Employees can claim 67 cents per hour of work from home during the relevant financial year. The rate includes the additional running expenses you incur for:
- home and mobile phone usage
- home and mobile internet or data
- electricity and gas (energy) for heating, cooling, and lighting
- stationery and computer consumables such as printer ink and paper.
This rate covers the total deductible expenses for the above additional running costs. If you opt for the fixed rate method, you cannot claim separate deductions for these expenses.
You can separately claim a deduction for the work-related use of technology and office furniture such as chairs, desks, computers, bookshelves. These are generally depreciating assets that decline in value over time. You can also claim the repairs and maintenance of these items.
For items costing less than $300 and used mainly for work-related purposes, you can claim an immediate deduction in the year of purchase. Examples include keyboards, computer mice, power boards, desk lamps, and chargers.
For purchases exceeding $300, you can claim a deduction for the decline in value of depreciating assets over their effective life.
Actual cost method
To use the actual cost method to claim actual expenses, you must:
- incur additional running expenses as a result of working from home
- keep records or other written evidence, which shows the amount:
o spent on expenses
o spent on depreciating assets you buy and use while working from home
o work-related use for your expenses and depreciating assets.
Need help calculating your work from home deductions? Connect with our team at Blackwattle Tax.
At Blackwattle Tax, we’re your trusted outsourced accounting team. We understand the challenges of calculating your work from home deductions. Our team of seasoned professionals, including chartered accountants and registered tax agents, is here to simplify the process for you.
Whether you’re exploring the ins and outs of claiming home office expenses or seeking advice on maximising your tax deductions, we’re here to support you. At Blackwattle Tax, we go beyond mere assistance; we craft personalised tax strategies.
With a proven track record spanning diverse sectors, Blackwattle Tax empowers clients with informed decisions for the best financial and tax results.
Schedule a FREE 30-minute consultation today to discover how we can enhance your tax planning and investment decisions.
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Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature. You should seek the assistance of a professional opinion for any legal and tax issues related to your personal circumstances.
