Due to Covid-19 a huge increase in people made the switch to working from home. Many of our own staff are among them. In fact as I write this, I too sit in the new home office I created for myself a few weeks ago.
But now that we’re paying to use our own internet, phone and power – plus, in some cases, our own equipment and furniture, it’s definitely time to re-visit the subject of work from home tax deductions.
Work from home tax deductions – the low down
Home office expenses
You need everything you use at work to do your job at home so let’s make sure that, come tax time, you get back these new work related expenses on your tax return.
Home office expenses are split into two types:
- Running expenses: for when you do some of your work from home.
- Occupancy expenses: if your permanent place of work IS your home.
If you are working from home on a temporary basis, it’s likely you would claim running expenses, rather than occupancy.
Running expenses are calculated at a nominal rate of $0.52 per hour you work at home. And, this rate includes:
- Heating
- Cooling
- Electricity
- Water
- Rent
- Mortgage Interest
It’s an easy way to make a claim for these items without trying to apportion a work vs personal amount for each one. Just keep a diary of how many hours you work from home each week and enter it on your tax return. Our tax return will calculate your deduction for you automatically.
On the other hand, occupancy expenses involve you working out a percentage of each item individually. You calculate the size of your office compared to the rest of your home and then claim that portion of your bills. For example, if your home office is 20m2 and your home is 200m2, you can claim 10% of your expenses on your tax return.
IMPORTANT: There is one golden rule about home office expenses:
You cannot claim home office expenses on your tax return unless you actually have a home office!
So what does that actually mean?
A home office is a designated room or area in your home set aside just for work that is not shared by other people. So basically, your kitchen table or the desk in your living room aren’t going to cut it as a home office in the eyes of the ATO. This is because you are not going to incur any additional running expenses for that area, if the space is being used anyway.
If you can, create a home home office. A spare bedroom, a sun room, the alcove under the stairs or a corner of the garage will all work. Not only will you then be able to claim home office expenses, you’ll also find it a lot easier to stay focused on your job while you’re working from home, especially if you have kids at home.
Get up to speed with the nitty-gritty of home office expenses
- Hop over to our Home Office Expenses blog for heaps more info about what to claim and how to claim home office expenses as work at home tax deductions.
No home office: Does that mean no work from home tax deductions?
Good news is, although you can’t claim home office expenses, you may be able to claim for items you had to buy or subscribe to do your job.
The three rules are:
- you must have spent the money yourself and weren’t reimbursed
- it must be directly related to earning your income
- you must have a record to prove it
General tax deductions when you work from home
- Car expenses, if you use your car for work related travel.
- Self education – if you pay to up-skill in an area of your existing job.
- Union fees
- Stationery: notebooks, paper, printer ink
- Trade magazines and books
- Tools and equipment
- Computers, laptops and software – if not supplied by your company
- Mobile phone costs
- Home internet costs
Take a read of our What are tax deductions blog so you’re totally up to speed on work related tax deductions
Need a little motivation or missing interaction while you’re at home?
I personally love working from home. I enjoy the focus I have when there are none of the distractions of an office environment. But that’s not the case for everyone. Working from home can be tough going if you’re not used to it. You might feel a little isolated or unmotivated. So we’ve written a post about that too. It’s called How to stay productive and happy!
