Home Office Expenses

Online tax return

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on email

If you’re an employee who works from home, you may be able to claim a deduction for expenses you incur relating to that work. These can be additional running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses.

If your home is your principal place of business, you should refer to running your business from home.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home.

Expenses you can’t claim

There are some expenses you can’t claim a deduction for as an employee. Employees who work at home can’t claim costs:

  • for coffee, tea, milk and other general household items your employer may provide you at work
  • for your children and their education including  
    • setting them up for online learning
    • teaching them at home
    • buying equipment such as iPads and desks
  • your employer pays for or repays you for the expense
  • for the decline in value of items provided by your employer – for example, a laptop or a phone.

Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.

Calculation methods

There are three ways of calculating home office expenses depending on your circumstances. The methods are the:

You must meet the record keeping requirements and working criteria to use each method.

Use our Home office expenses calculators to help work out your deduction.

Once you have calculated your deduction, enter the amount at ‘Other work-related expenses‘ in your tax return.

Shortcut method

The shortcut method simplifies how you calculate your deduction for working from home. Using this method, you can claim 80 cents per hour for each hour you work from home.

This method is temporary and can only be used to work out your work from home deduction:

  • between 1 March to 30 June 2020 in the 2019–20 income year
  • for the 2020–21 income year.

All employees who work from home during these dates can use this method if you:

  • are working from home to fulfil your employment duties, not just carrying out minimal tasks such as occasionally checking emails or taking calls
  • have incurred additional running expenses as a result of working from home.

The shortcut method covers all your working from home expenses, such as:

  • phone expenses
  • internet expenses
  • the decline in value of equipment and furniture
  • electricity and gas for heating, cooling and lighting.

If you use this method, you can’t claim any other expenses for working from home.

You don’t need to have a dedicated work area to use this method. However, you must keep a record of the number of hours you have worked from home. This could be a timesheet, roster, a diary or documents that set out the hours you worked from home.

You don’t have to use the shortcut method, you can choose to use one of the existing methods to calculate your deduction. You can use the method or methods that will give you the best outcome as long as you meet the working criteria and record keeping requirements for each method.

If you had a work from home arrangement before 1 March 2020, you will need to use one of the existing methods to calculate your deduction for the period 1 July 2019 to 29 February 2020.

The shortcut method includes decline in value of all items. If you choose to use this method there is no requirement to separately calculate the decline in value of equipment or depreciating assets. However, as you may combine methods or use a different method in later years it’s important to keep the:

  • receipts for depreciating assets or equipment you use when working from home
  • records of how you calculated your work-related use of the asset
  • your decline in value calculations.

See also:

Fixed rate method

You can claim a deduction for additional running expenses you incur when you work from home. The fixed rate is 52 cents for each hour you work from home. The rate covers the additional running expenses you incur for:

  • the decline in value of home office furniture and furnishings – for example, a desk
  • electricity and gas for heating, cooling and lighting
  • the cost of repairs to your home office equipment, furniture and furnishings.

To claim using this method, you must keep records of either:

  • your actual hours spent working at home for the year
  • a diary for a representative four-week period to show your usual pattern of working at home.

You can apply the four-week representative period across the remainder of the year to determine your full deduction amount. However, if your work pattern changes you will need to create a new record.

To use this method, you need to have a dedicated work area, such as a home office when you work from home.

This method doesn’t include the following, so you will need to separately calculate your work-related use for:

  • phone expenses
  • internet expenses
  • computer consumables and stationery – such as ink
  • decline in value of equipment – such as phones, computers and laptops.

To claim the work-related portion of these expenses you must have records such as:

  • receipts or other written evidence that shows the amount spent on expenses and depreciating assets you purchased
  • phone accounts identifying your work-related calls and private calls to work out your percentage of work-related use for a representative period
  • a diary that shows      
    • a representative four-week period of your usual pattern of working at home
    • any small expenses ($10 or less) that you can’t get a receipt for totalling no more than $200
    • your work-related internet use
    • the percentage of the year you used depreciating assets exclusively for work.

Watch: Claiming for a computer, phone or other electronic device as a work-related expense

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. This may include the following expenses:

  • electricity and gas for cooling, heating and lighting
  • the decline in value of home office furniture (desk, chair) and furnishings,
  • the decline in value of phones, computers, laptops or similar devices
  • phone expenses
  • internet expenses
  • cleaning (if you use a dedicated area for working)
  • computer consumables and stationery – such as ink

If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. For example, if the area you use for work is a common area of the home such as a lounge room and that area is being used by other members of your household for another purpose (such as, family members watching television) at the same time you’re working, you won’t be incurring any additional costs for lighting, heating or cooling as a result of working in that room.

To work out the work-related portion of your actual expenses you must have records. You can either keep:

  • a record of the number of actual hours you work from home during the income year
  • a diary for a representative four-week period to show your usual pattern of working at home
  • work out the decline in value of depreciating assets and        
    • keep receipts showing the amount you spent on the assets
    • show the percentage of the year you used those depreciating assets exclusively for work – you can claim for the portion of the decline in value that reflects your work-related use of the depreciating assets
  • work out the cost of your cleaning expenses (if you have a dedicated work area) – for example, a room set up as a home office, by adding together your receipts and multiplying it by the floor area of your dedicated work area (floor area of the dedicated work area divided by the whole area of the house as a percentage) – your claim should be apportioned for any        
    • private use of your home office
    • use of the home office by other family members
  • work out the cost of your heating, cooling and lighting by working out the following        
    • the cost per unit of power used – refer to your utility bill for this information
    • the average units used per hour – this is the power consumption per kilowatt hour for each appliance, equipment or light used
    • the total annual hours used for work-related purposes – refer to your record of hours worked or your diary for this information
  • work out the cost of your phone or internet plan expenses – where you receive an itemised bill, you need to determine your percentage of work use over a four-week representative period. See Claiming mobile phone, internet and home phone expenses.
  • work out the cost of computer consumables and stationery by keeping receipts for the items purchased.

You must take into account other members of your household when you work out your expenses. If a member of your household is using the same area of the house or the same service when you’re working, you must apportion your expenses accordingly.

To claim a deduction for an asset that cost $300 or more, you need to calculate the decline in value for both the period you:

  • owned the assets during the income year
  • used the assets for work-related purposes.

You can use the depreciation and capital allowances tool to calculate your deduction for the decline in value of equipment, furniture and furnishings that cost more than $300, use the depreciation and capital allowances tool to work this out.

You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year. It’s a fast, easy way to capture information on the go by taking and uploading photos of receipts.

More To Explore

Tax Return - Work Related Deduction

Quarantine expenses when travelling on work

Expenses for accommodation, food and drink expenses are normally private in nature and not deductible by employees. However, you can claim a deduction for accommodation,

News

What is negative gearing?

You can claim a deduction for your rental property related expenses for the period your property is rented or is genuinely available for rent. If

Online tax return
Tax Return - Work Related Deduction

Home Office Expenses Rate 2021

Fixed rate method You can claim a deduction for additional running expenses you incur when you work from home. The fixed rate is 52 cents for

Online tax return

Tax return with written form application

Don'w worry! It's still easy as 123.

One,

Click above icon to download the tax return application

Two,

Consultation
with an accountant

Three. Done!

Confirmation
of refund and fee payment

Let's Talk

Any question for us?

Call

0466 903 321

Online tax return

Messauge

Click Icon

Online tax return

or Email

online@tax123.com.au