What costs can you claim on tax when you’re working from home?
Last Updated 12.15pm, June 15
Are you currently reading this on your self-appointed lunch break as you work from home? Since offices shut down across the country to adhere to physical distancing regulations during COVID-19, many lounge rooms have become home offices. While this is a great privilege – a huge portion of the population haven't been able to continue their jobs from home – it does present some challenges.
Since you’re set up on your computer at home, possibly using your personal phone and other devices, and running it all from your home internet and energy grid, you could be racking up some considerable costs. So, whether this is your first working-from-home-rodeo or a repeat journey to your official home office, you should always consider how it affects your tax.
Mark Chapman, the Director of Tax Communications at tax preparation specialist H&R Block, says while one in three taxpayers makes a claim for work away from their employer premises, he’s expecting a massive increase in those numbers.
“Increasingly, medical advice is that Australians should self-isolate, and to enable businesses to continue to operate many employers are encouraging – and even mandating – that staff stay away from the office and instead work from home.”
Luckily for the newly-minted armchair workforce, a surge in home utility and other costs can be offset come tax time.
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What can you claim on tax when WFH?
There’s a surprising amount that is claimable when working from home. It includes:
- 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 (you could be thinking spray-and-wipe or 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 appliances
- 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 is off the WFH tax deductible table?
The big one on the ‘nay’ side of things is rent and mortgage. While it seems feasible that this could be included along with other ongoing utilities, it’s not generally the case.
“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 homework for documenting how much time the area is devoted to work and how much it’s used for your own and others’ outside-of-work activities. 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 you make a WFH tax claim and back it up?
With potentially multiple people living and working in a household, and utilities being all bundled up together, things can get complicated. So 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.
- ATO rate per-hour
A simpler method is to use the ATO’s hourly rate for your time spent working at home. This rate normally sits at 52 cents per-hour, but in light of the government recommending those able to work from home do so, this amount has been increased to 80 cents per hour.
The increase has been introduced in an effort to streamline claims for those new to the process, which has likely increased due to COVID-19 working restrictions. The rate is accessible for any work conducted at home after March 1 (the ongoing timeline will be reviewed by the ATO after June 30), and the requirements around identifying a dedicated workspace have also been removed.
As it did previously, the rate considers heating, cooling, lighting and furniture depreciation. However, you'll need to revert to the 52 cents per-hour rate if you want to list separate claims for phone and internet expenses, appliance depreciation and computer consumables as well.
Before you lock in a method in preparation for tax time, assess where your biggest costs are coming from. You may lose out if your biggest expenses are related to internet and technology purchases and use if you go with the 80 cents per-hour scheme.