What expenses can I deduct working from home?
What's changed?
The ATO stated that you always had to have a dedicated home office in order to claim any working from home expenses.
After 1 July 2022
Now the ATO have said that you no longer need a home office to claim deductions for working from home. Setting up the laptop on the kitchen table is now acceptable.
Fixed Rate method
This method involves using the hours actually worked from home to cover a variety of costs.
After 1 July 2022 - 67c/hour
This method now includes:
data & internet
mobile & home phone usage
electricity & gas
computer consumables
stationery
In addition to this you can claim:
decline in assets such as computers and office furniture
repairs and maintenance of said assets
cleaning (if you have a dedicated office)
You are required, from 1 March 2023, to keep a diary all year to now substantiate the hours you claim.
Shortcut Method - 80c/hour
This was introduced in recognition of everyone working from home during COVID-19. It was available for use from March 2020 until 30 June 2022.
It covered everything! Which meant it wasn't always the most tax effective - unless the boss was paying for your mobile phone bill and supplying your equipment and furniture.
data & internet
mobile & home phone usage
electricity & gas
computer consumables
stationery
decline in assets such as computers and office furniture
repairs and maintenance of said assets
cleaning (if you have a dedicated office)
Actual Method - always available
A lot more record keeping is required for this method - but it's absolutely worth it.
This involves keeping a record of what actual hours you work from home. The ATO requires you keep a 4 week diary every year to substantiate your claim (they didn't increase this to a whole year, unlike the fixed rate method from 1 March 2023). Using this, you can claim the business/work use of everything.
data & internet
mobile & home phone usage
electricity & gas
computer consumables
stationery
decline in assets such as computers and office furniture
repairs and maintenance of said assets
cleaning (if you have a dedicated office)
if renting and have a dedicated home office, you can claim a portion of your rent apportioned on a floor area basis
This is now the accountants preferred method as it results in the highest deduction. But if you don't have good records, we will use the Fixed Rate Method - be warned!
Keeping Records
No matter what method you use, you have to be able to prove it. Keep a diary on you desk for 4 weeks of the year (or the whole year if you're using fixed rate) and write down your start and finish times, go through your phone bill for a month and compare private vs business calls to determine your deductible percentage. Try and record your Facebook scrolling vs work research on your phone or home computer for internet deductible percentage. And last but not least, don't be afraid to make a claim - if you're actually using these things to generate an income, you can claim it!
Make use of the ATO myDeductions App to help you out with recording your expenses too, especially the big purchases like a computer or phone.
Capital Gains Tax
If you have a dedicated home office and you want to make additional claims, you can also include a portion of your home costs, such as:
Interest on your home loan
Rates
Insurance
Depreciation on capital assets such as air-conditioners or other works done to turn that room/extension into your home office
If you are claiming these items, be aware that on the sale of your home (Primary Place of Residence - PPR) is now going to be subject to capital gains tax.
The basics? If you are claiming a tax deduction, then you have to declare the income.
Insurance
If you are working under your own ABN from home, you must make sure your insurance company is aware. You must also ensure you have the correct insurance to cover your business, especially if you are engaging in high risk activities or have clients visiting you at home. Speak with a specialist about your insurance needs if you have any doubts - I recommend Cairns Business Insurance Solutions.
There was a recent article issued by ABC about multiple businesses no longer being eligible for home and contents insurance because they were operating their businesses, or had them registered, at home. I have included a link to this below in 'More Information'.
More information
Referrals
To discuss any of the above further, you can ring me on 4021 2801.
''Problems are not stop signs, they are guidelines" - Robert H Shuller