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Working from Home Tax Deductions

Q: Is work-from-home expenses tax deductible?

Yes, there are a wide variety of home expenses that are tax-deductible if you work from home, whether all or some of the time.

Q: Is rent tax deductible if I work from home?

Yes, you can claim occupancy rates if you work from home in a dedicated office full-time.

Q: What working from home tax deductions can I claim?

Provided you have records of your expenses, you can claim a wide variety of tax deductions.

May 18, 2023

Technology has changed the way many people work. Working at home was once a rarity, but today it's become the new norm across a variety of industries. The ability to work from home provides many with flexibility in their work-life balance and has potential tax deductions related to home offices.

When claiming expenses, it's important to have records to substantiate your claim and to claim for the correct amount. For example, you can claim a portion of home office expenses, but only for the work-related part and for the hours you worked. The Australian Tax Office (ATO) has introduced new rules for claiming deductions for those working from home.

Rules for Claiming Working From Home Deductions

To qualify for working-from-home deductions, you must:

Incur extra running expenses due to working from home
Perform your employment duties from home (not just minor tasks)
Keep records when you work to verify your expenses

If you only work from home sometimes and spend the rest of the time at the office, you won’t be able to claim occupancy expenses even if you have a home office. You can, however, claim for some of the running expenses.

You can claim a deduction for working from home expenses for various expenses. At the end of the financial year, you can file your tax return with the below tax deductions.

Occupancy: If you have an office for home use you can deduct a part of the occupancy rate, whether it's rent, land taxes or home insurance.
Heating cooling and lighting: You can claim a portion of your household utility bills. You can claim for the hours you officially operate business hours at home.
Office Furniture: Whether it's a computer, telephone line, or desk, work equipment is one of the expenses you can claim. For an item up to $300, you can claim the full amount. For items over $300, you can claim the decline in value. You can also claim for work phone calls, whether it's on your personal mobile or home line.
Depreciation: In addition to deductions that relate to running your home office, you can also claim depreciation. Whether it's office furniture, fittings, equipment or computers.

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Calculating Working From Home Deductions

There are two methods for calculating your working from home expenses: the revised fixed rate method and the actual cost method. Note that you can only claim the work-related portion of an expense.

Revised Fixed Rate Method:

The revised fixed rate method lets you claim 67 cents per hour you work from home, covering the following expenses:

Data and internet usage
Mobile and home phone usage
Electricity and gas
Computer consumables (e.g., printer ink)
Stationery

With this method, you cannot claim separate deductions for the expenses included in the revised fixed rate. However, you can claim separate deductions for:

Decline in value of assets used while working from home (computers, office furniture)
Repairs and maintenance of these assets
Cleaning (only if you have a dedicated home office)

Actual Cost Method:

The actual cost method allows you to claim deductions for the actual expenses you incur due to working from home. Possible deductible expenses include:

Data and internet usage
Mobile and home phone usage
Electricity and gas
Computer consumables (e.g., printer ink)
Stationery
Decline in value of assets used while working from home (computers, office furniture), as well as any maintenance and repairs of these items
Cleaning (only if you have a dedicated home office)

This method requires detailed calculations and records, such as the cost per unit of electricity and the average units used per hour.

Record Keeping Checklist

For the revised fixed rate method, you need to keep records of all the hours you work from home for the entire year (e.g., timesheet, roster, diary) and evidence of paid expenses covered by the revised fixed rate method (e.g., one bill for phone and electricity). Additionally, keep records for items claimed as separate deductions.

For the actual cost method, maintain a record for every expense you claim, including receipts, bills, or invoices with the supplier's information, expense amount, nature of goods, payment date, and document date. You also need evidence of personal and work-related use of the items or services you buy and use.

What You Can & Can't Claim On Tax When Working From Home

You cannot claim for equipment your employer provides, items you are reimbursed for, childcare costs, costs of children's education, expenses covering the times you aren't working, general household items, or your food and drink intake, from coffee and tea to lunches.

If you are temporarily working from home or work from home only part of the time, you cannot claim for occupancy expenses, such as rent, rates, mortgage interest, or insurance.

How QuickBooks Can Help

The biggest challenge many business owners face when it comes to tax deductions and filings, it's staying organised. With QuickBooks Tax Software, your records are kept safe and organised so it's available at your fingertips whenever you need them.

While every care has been taken to ensure the accuracy of the information presented as at 12 April 2024, Intuit is not providing you with professional advice and we recommend you obtain your own professional advice. Intuit is not liable for your use of the information presented.

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Working from Home Tax Deductions

Rules for Claiming Working From Home Deductions

Grow Your Business with QuickBooks

Calculating Working From Home Deductions

Revised Fixed Rate Method:

Actual Cost Method:

Record Keeping Checklist

What You Can & Can't Claim On Tax When Working From Home

How QuickBooks Can Help

FAQs

Related Articles

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