You don’t have to be self-employed and working only from home in order to be eligible for tax deductions on your home office.
Many people who are employed by a company do some of their work from home to make better use of their time and create a healthier work-life balance.
If you use your home office for work duties, even if you also use the room for other purposes, you may be able to claim a deduction for the portion of the running costs that can be attributed to work.
Possible tax deductions on your home office
There are various work-related expenses you may be able to claim as tax deductions on your home office. However, only the proportion of each one used for your work is eligible:
- depreciation of home-office furniture, fittings and equipment such as computers and desks (you can claim for a full deduction of the work-related portion if the equipment costs less than $300)
- home telephone calls
- home telephone rental if:
- you are on call
- you have to phone your employer, clients or students regularly while you are away from your workplace
- internet access charges
- printer and printer cartridges
- the cost of heating, cooling and lighting your home office above the amount you would ordinarily have to pay if you did not work from home
- the costs of repairs to your home-office furniture and fittings.
You might be surprised at the number of things you can claim for. As you sit at your desk at home, take a look around and identify all the things in the room that you use, even partially, for work purposes.
If you are a paid employee, you probably won’t be able to claim a deduction for occupancy expenses on your home including rent, mortgage interest, and council tax. These are only eligible if your home office is considered a place of business.
How much can I claim?
The ATO offers two options when it comes to making a claim. You can either log all of your actual expenses in a diary and keep receipts and bills as evidence of your costs, or you can claim a flat rate of 45 cents per hour that you use the office for work. This flat rate is intended to cover heating and cooling costs as well as the decline in value of any equipment you use.
Let’s imagine Dave uses his personal computer and home internet connection to grade student assignments. From his work diary he can see that about 35% of the time he spends on his computer is used for work and 65% is personal use. He can therefore claim 35% of his internet costs and the decline in value of his computer as work-related deductions. He must supply the ATO with his internet bills and proof of purchase of his computer, as well as having his work diary to support the claim.
Whichever option you choose, you’ll still need to complete a diary for a minimum of four weeks to show how much time you spend in your home office for work purposes. This can then be extrapolated over the full year to calculate the amount you can claim for.
For example, Emma records her home office use in a diary for four weeks and finds that she spends an average of four hours working in her home office each weekday. She worked 46 weeks last year, so she could claim for a tax deduction of $414 (20 hours x 46 weeks x 45 cents).
- You are eligible to claim for tax deductions on your home office if you work from home at least part of the time
- You may claim a tax deduction on a portion of the running costs and decline in value on equipment you use
- As a paid employee, you can’t claim for occupancy costs like rent and insurance unless your office is considered a place of business
- You can claim for actual expenses by calculating the costs apportioned to work-related duties, or you can claim a flat rate of 45 cents per hour spent doing work in your home office
- You will need to keep a diary for at least four weeks to record the amount of time spent on work vs. personal use