Working From Home Deductions

Everybody loves a good tax deduction!

By Travis Bacon

December 01, 2020

Everybody loves a good tax deduction! And here at TaxDigital, we are no different. With the increase in people working from home this year and those that already do, make sure you're aware of the items you can legally claim on your tax return.

Basic Criteria for Deductions

First of all, there are three main conditions a deduction for working from home must meet the following conditions:

  1. You have spent the money; and
  2. You must have a record of the expense (i.e. an invoice); and
  3. The expense is directly related to earning your income.

You can't claim a deduction for something provided by an employer or something that another person paid for.

If your employer has paid you an allowance to cover the cost of your expenses then you:

  1. Must include the allowance income in your return; and
  2. Claim a deduction for the actual cost of the expense you incurred.

Expenses you can claim

Let's take a closer look at some tax deductions you may be able to claim.

Telephone and Internet Costs

If you work from home chances are you use your own phone and internet for work purposes, if you do, then you can claim a deduction for the work-related percentage of the expense.

Record-Keeping Requirements:

For a deduction totalling more than $50, you need to keep records for a four-week representative period during the tax year. Records can include diary entries, including electronic records, and bills from which you can identify the work-related costs.

There are many different types of phone plans and bundled packages which make record keeping a pain. The ATO has laid out some handy information to help in those situations: ATO – Claiming mobile phone, internet and home phone expenses.

Electricity Expenses

You can claim electricity costs associated with the area you are working from such as heating/cooling, lighting, computer and consumable power supply, etc.

Record-Keeping Requirements:

To calculate you're your deduction, you will be required to keep receipts showing the amount you spent on electricity (i.e. utility bill). There are three options when working out the deduction amount of your electricity costs:

  • the cost per unit of power used; or
  • the average units used per hour; or
  • the total annual hours used for work-related purposes.

Cleaning Costs

You can claim the costs associated with cleaning a dedicated working area. Expenses can include materials and supplies or even a cleaner. Note that you can only claim the costs associated with your work area and not your whole home.

Record-Keeping Requirements:

To calculate you're your deduction, you will be required to:      

  1. Keep receipts showing the amount you spent on the assets; and
  2. Apportion the expenses for private costs.
    I.e. You will need to apportion your costs based on the floor area of your dedicated workspace compared to the total area of your home. Also, you need to take into consideration any personal use of your home office and the use of the home office by other family members.

Computer Consumables & Stationery

Where you purchase consumables to be able to complete your work such as printer paper & ink, stationery, etc. you can claim a deduction for those costs.

Record-Keeping Requirements:

To calculate you're your deduction, you will be required to keep receipts showing the amount you spent on the assets.

Home Office Equipment

If you have purchases equipment including computers, printers, phones, furniture and furnishings to perform your work duties, you can:

  • Claim the full cost of items up to $300, or
  • Claim a decline in value (depreciation) for items over $300.

 Record-Keeping Requirements:

To calculate you're your deduction, you will be required to:      

1)       keep receipts showing the amount you spent on the assets; and

2)      show the work-related percentage for the relevant tax – this is typically in the form of a diary over four weeks leading your usual work usage.

I Didn't Keep Invoices, Now What?

Let's be honest; not everyone remembers to keep their receipts, or if they do, they are entirely faded by tax time. If this sounds like you, then you're in luck!

You may be able to claim a set-rate for each hour you worked from home during the tax year.

  1. The shortcut method (80 cents per work hour) - this is a special rate due to COVID-19 and is only available from 1 March to December 2020; or
  2. The fixed-rate method (52 cents per work hour)

There are some caveats to these set rates, and it can be tricky to navigate. We always suggest getting an accountants opinion. However, more information can be found here.

Expenses you can't claim

If you are working from home, you can't claim:

  • The cost of coffee, tea, milk and other general household items.

  • Any costs related to children and their education.

  • Items that you have been reimbursed for by your employer (i.e. monitor, desks, etc)

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

Industry-Specific Deductions

The ATO provides a comprehensive list of guides for specific jobs and industries to help you understand what you can claim as a tax deduction.

If you would like some personalised advice on the best tax deductions for you, feel free to reach out to us on  0407 438 849 or contact@taxdigital.com.au.

 

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek personalised tax advice from us at TaxDigital. Information is current at the date of issue and may change.

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