What costs can you claim on tax when you’re working from home?

Are you reading this article from your home office? Over the past two years, many lounge rooms have made the transition. While this is a great privilege – not every job was so easily transitioned to working from home (or “WFH”) during the COVID-19 lockdowns – it has presented some unique challenges.

Working from home can add considerable costs to your bills. Running your personal computer, mobile and other devices can send energy costs sky high, especially when added to all-day lighting and heating or air-conditioning. You’ll also have probably found yourself needing more internet and a faster connection than you did in the days of casual browsing, to keep up with all those mandatory Zoom meetings.

Whether this is your first rodeo with working-from-home or you’re a seasoned expert with the at-home office, you should always consider how it affects your tax - and what you can claim.

What can I claim on tax when WFH?

There are a surprising amount of things that are claimable when working from home. These include:

• Utility bills (heating, cooling and lighting) depending on what kind of space you use to work at home and how it’s otherwise used
• The costs of cleaning your home working area (Ranging from spray-and-wipe to a personal cleaner)
• Repairs and depreciation of home office furniture and fittings, as well as equipment and computers if you’re using your personal technology instead of office-supplied hardware
• Small capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately (they don’t need to be depreciated)
• Computer consumables (like printer ink) and stationery
• Phone (mobile and/or landline) and internet expenses

What can't I claim when working from home?

A big one that’s off the table is rent and mortgage. Even though this is tempting to tack on, it’s not an additional cost that comes with working from home.

Mark Chapman, the Director of Tax Communications at tax preparation specialist H&R Block, says this deduction is set aside for only a few cases.

“If you run a home-based business, you can claim a portion of your rent or mortgage interest repayments,” Chapman says.

“However, if you simply work from home as an employee and your normal work-base is somewhere else like an office in the CBD, you can’t claim any of your rent or mortgage interest expenses. This is because, in theory, there is no additional cost to you from working at home; your rent doesn’t go up and your mortgage doesn’t increase.”

If possible, you’ll also want to have a specific room allocated for your DIY office space. If you’re getting down to business in a communal room like the kitchen or lounge room, there’ll be extra work for documenting how much time the area is devoted to work and how much it’s used for outside-of-work activities. That means separating your work internet from your relaxing-with-Netflix internet.

It can be done, but you’ll want to refer to the Australian Tax Office’s (ATO) guidelines on what you can and can’t claim based on how you use your home for work.

How do I make a tax claim and back it up?

With multiple people potentially living and working in a household, and utilities being all bundled up together, things can get complicated. However you choose to record your home-office use for tax, be sure to keep your accounts in order. There are two main methods for doing this.

• Diary and running expenses

This involves recording the time you spend working from home, and addressing how that time compares to the rest of the hours used in that space. Chapman says having a physical or electronic diary which records your daily working hours is the key to proving the viability of your claim to the ATO.

“You’ll need to work out the amount of your home (by floor area) that you’re using as your work space. From this, you can then work out the work-related proportion of your household expenses and apply this percentage to the actual amount you spend on electricity, gas, water, phone, internet and so on.” 

He says this is generally the most accurate claiming method and thus produces a larger claim amount, but ramps up the paperwork and calculations.

“You should use a tax agent to help with your claim if you intend to use this method,” Chapman says.

Tricky, but trusty!

• ATO rate per-hour

A simpler method is to use the ATO’s hourly rate for your time spent working at home, otherwise known as the 'Fixed Rate method'. This is a rate of 52 cents per-hour, calculated to include heating, cooling, and office furnishings. Mobile and energy bills can be calculated separately from this rate, as well as the depreciation of equipment like computers and printers.

In light of continued COVID-19 restrictions and recommendations through 2021 and 2022, the ATO has extended the “Shortcut method” for calculating expenses, introduced in 2020, which sits at 80 cents per hour.

The increase has been introduced in an effort to streamline claims for those new to the process. The shortcut method includes heating, cooling, and furniture costs and also accounts for depreciation and bills. Moving forward, the rate is accessible for anyone who conducted work at home in the 2021/2022 financial calendar year.

Before you lock in a method in preparation for tax time, assess where your biggest costs are coming from. If your biggest expenses are related to internet and technology purchases and use, you may lose out by going with the shortcut 80 cents per-hour scheme.

What else do I need to keep in mind for tax time?

If you are, like many people, working partially in the office and partially at home, there are other things to consider. You may be able to claim some interesting things, most notably if your workplace requires you to wear masks or do COVID tests but does not provide them.

You should also be sure not to accidentally - or sneakily! - make any double dip claims, as the ATO are on high alert for this with so many people working from home.

Not sure what to do with that tax refund? Check out Mozo’s best savings accounts. Be sure to head to our Family Finances hub for more must-have info on your everyday spending.