Working From Home Tax Deductions: A Complete Guide

If part of your job happens at home, you may be entitled to claim a deduction for the extra costs that come with it. But working from home deductions are an area the ATO reviews closely so it pays to understand exactly what you can claim and what records you need to back it up.

Who Can Claim a Working From Home Deduction?

To be eligible, you generally need to meet three conditions:

• You're working from home to fulfil your employment duties not just completing minimal tasks such as occasionally checking emails or taking calls

• You incur additional running expenses as a direct result of working from home

• You have records to show both the expenses you incurred and the hours you worked from home during the income year

You can only claim the work-related portion of an expense where a cost covers both private and work use, you need to apportion it.

Two Ways to Calculate Your Claim

The ATO allows two methods to work out your deduction. You can choose either one but you can't claim the same expense under both.

1. Fixed Rate Method

This method lets you claim a set rate for every hour you work from home, covering expenses that are often difficult to apportion, including:

• Data and internet

• Mobile and home phone usage

• Electricity and gas

• Computer consumables (such as printer ink)

• Stationery

You don't need a dedicated home office to use this method.

Because these costs are already covered by the rate, you can't claim a separate deduction for any of the expenses the fixed rate includes.

You can still claim separately:

• The decline in value of assets used while working from home, such as computers and office furniture

• The repairs and maintenance of these assets

• Cleaning costs, if you have a dedicated home office

2. Actual Cost Method

This method allows you to claim a deduction for the actual expenses you incur as a result of working from home. This may include:

• Data and internet

• Mobile and home phone usage

• Electricity and gas

• Computer consumables

• Stationery

• Decline in value of assets used while working from home, such as computers and office furniture, plus any maintenance and repairs

• Cleaning, if you have a dedicated home office

This method requires detailed calculations and records, for example, you'll need to know the cost per unit of electricity and the average units used per hour.

As an employee working from home, you generally can't claim occupancy expenses such as rent, insurance or mortgage interest under either method.

What Records Do You Need to Keep?

If you use the fixed rate method, you'll need:

• A record of all the hours you work from home for the entire year (timesheets, rosters or a diary) - an estimate won't be accepted

• Evidence for the expenses covered by the fixed rate that you incurred (for example, if you use your phone and electricity when working from home, keep one bill for each of these expenses)

• Records for any depreciating assets you claim as a separate deduction, including how you worked out your work-related use

If you use the actual cost method, you'll need:

• A record that represents the hours you work from home (such as timesheets, rosters or a diary showing at least a 4-week regular pattern of work)

• Evidence for every expense you claim, including receipts, bills or invoices showing the supplier, amount, nature of the expense, date it was paid and date of the document

• Evidence of your personal and work-related use of the items or services you buy and use

In most cases, a bank or credit card statement on its own is not sufficient evidence of a work-related expense.

For depreciating assets and equipment (applies to both methods), you'll also need records showing:

• The name of the supplier, amount of the item, nature of the goods, date it was paid and date of the document

• When you started using the item for a work-related purpose

• How you worked out your percentage of work-related use, such as a diary showing the purpose and use of the item for work

• Either a copy of the Commissioner's determination of effective life you used to work out the decline in value, or how you worked out the effective life yourself

• Which method you chose to work out the decline in value

Expenses You Can't Claim

You can't claim a deduction for:

• Coffee, tea, milk and other general household items, even if your employer provides these at work

• Items your employer provides such as a laptop or a mobile phone

• Expenses your employer reimburses you for

Final Thoughts

Working from home deductions can add up to a meaningful amount on your tax return but getting the method and evidence right matters just as much as knowing what's included. Since your correct claim depends on your personal work pattern and expenses, it's worth having a professional review your situation before you lodge.

Need help working out which method suits you best? Gordon QC Du & Associates can review your work-from-home expenses and help you claim what you're entitled to accurately and with confidence.

Disclaimer: This post contains general information only and does not constitute specific tax or financial advice. Please consult a registered tax agent regarding your specific circumstances.

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