What can you claim working from home?
22/02/2022
As we continue to work from home and emerge from Covid-19, many employers will continue to provide a hybrid working arrangement for employees, that is, a mix of working from home (WFH) and working from the employer premises.
Careful consideration, planning and record keeping should be undertaken throughout this financial year in respect of work related home office expenses in order to maximise the deduction at year end.
Examples of WFH deductions you may be able to claim
- Heating, cooling and lighting
- Telephone call and phone rental costs relating to landline and mobile phones
- Internet data costs
- Decline in value of furniture and fittings such as desks, chairs, shelving and cupboards which you use for work-related activity
- Decline in value of office equipment such as computers, laptops, tablets, smart phones and printers which you use for work related activity
- Computer consumables such as printer ink and stationery
- Costs of repairs to home office furniture and fittings
- Home office cleaning expenses.
The rules:
- Expenses incurred must be directly related to work;
- Must have been paid out of own pocket; and
- Cannot have been reimbursed by the employer.
What has changed?
From 1 March 2020 to 30 June 2022, an actual home office is not required in order to claim home office expenses.
Prior to 1 March 2020, a home office was required to be a designated room or area in the home set aside just for work, not shared by other people and not used for other purposes.
The ATO will now allow home office expenses to be claimed when working from the kitchen table or from a sofa.
Methods to calculate your WFH claim
1. Shortcut method
Using the short cut method, a tax deduction of 80 cents can be claimed for each hour worked from home.
This method covers costs such as:
- Electricity and gas
- Telephone
- Internet
- Decline in value of equipment and furniture.
This method is suitable for those working from home, without a dedicated home office space and making do.
If there are multiple individuals working from home, each individual can claim 80 cents per hour. This includes both members of a couple living together.
2. Fixed rate method
Using the fixed rate method, a tax deduction of 52 cents can be claimed for each hour worked from home.
This method covers costs such as;
- Electricity and gas
- Decline in value of furniture and fittings
- Repairs to your home office equipment, furniture and furnishings
- Cleaning.
To use this method, you must have a dedicated workspace in your home.
After claiming using the fixed rate, a claim for telephone, internet and decline in value of technology items, stationery and computer consumables can also be made.
3. Actual cost method for home expenses
Using the actual expenses method, the claim is calculated by calculating the actual expenses incurred to produce income when working from home.
This may include the following expenses:
- Electricity and gas
- Decline in value of furniture and fittings
- Decline in value of decline in value of telephones, computers, laptops or similar devices
- Phone expenses
- Internet expenses
- Cleaning
- Computer consumables and stationery.
For example, any electricity costs claimed will need to be calculated by looking at the cost per per kilowatt of power and the number of hours used for work related purposes. Similarly, telephone expenses bills will need to be itemised. Calls and data incurred specifically for work related purposes will need to be summarised.
Common mistakes made when calculating WFH claims
- Not apportioning shared bills. Mistakenly individuals often claim the entire monthly bill even though the cost of that bill is shared with others. For example, if the monthly internet bill is $100 and it is shared by two individuals, the claim is then $50 per individual and not the full $100
- Not having a good understanding how the depreciation rules work. Assets purchased such as desks, chairs, filing cabinets, computers and printers have different “working lives” therefore, specific depreciation rates should be applied
- Claiming home office expenses when there is not a dedicated room or office in your home
- Claiming a too high a work-related proportion for a particular type of expense. For example; the personal use of telephone or internet should not be claimed
- Not keeping appropriate records to substantiate the expense
- Not making a WFH claim when you are entitled to .80 cents per hour. This adds up.
What should you do prior to year end in order to maximise WFH claims
- Keep record of the number of hours worked from home each week over the financial year. This could be a diary or timesheet; and
- Keep receipts for all eligible expenses so each method can be considered to work out the highest claim.
How can SW help
- Provide further information and discuss which method suits your circumstances best
- Advice around how to ensure the maximum tax benefit is obtained with minimal administration workload
- Review expenses incurred and advise which expenses are eligible and can be claimed
- Provide assistance with determining the useful life of assets and assist with calculating decline in value of work related items
- Assist in calculating work related claims using the three methods and provision of workpapers to support the claim in the event of an audit.
