It’s 1st of July which means another income year has come to an end. With the deadline for lodging tax returns just around the corner, it is time to think the expenses you have incurred over the last financial year for your business. In the past few years, there has been a rise in the amount of Australians working from home. Flexible working conditions are sought to accommodate personal commitments and choices. However, claiming home office expenses can be a bit tricky if you are unfamiliar with the conditions placed on expenses incurred by working from home. In this guide, we’ll tell you some of the things you can claim if you work from home.
Claimable home office expenses
Your eligibility to claim deductions tends to depend on how you work from home. Home-based businesses are classified into three categories:
Your home is your principal place of business and you have a dedicated office area
- You can claim occupancy expenses if your home or part of your home is your principal place of work. Occupancy expenses include rent, mortgage, council rates, house insurance premiums.
- You can claim any expenses associated with running your business.These expenses can include electricity for lighting or aircon.
- You can claim the depreciated value of curtains, light fittings etc.
- Any work-related phone calls, internet and phone rental can be claimed. If the phone line is also used for personal reasons, it is essential that you record and only claim for the portion of work-related use of the line. You can claim up to $50 if you lack proper records to show phone and internet expenses.
- You can claim the full cost of office equipment for items that cost up to $300 or for the decline in value for items over $300. For example, you can claim the full cost for a printer that costs $290 while you have to calculate the decline in value for a table that costs $400.
Your home is not your principal place of business but you have a dedicated office area
- You cannot claim any occupancy expenses as your principal place of business is not your home.
- You can claim any expenses associated with running your business from home. These expenses can include electricity for lighting or aircon used only for work purposes.
- You can claim any work-related phone calls and phone rental.
- The depreciated value of curtains, light fittings etc can be claimed.
- You can claim the full cost of office equipment or decline in value for items depending on their costs.
Your home is your principal place of business but you don’t have a dedicated office area
- You cannot claim any occupancy expenses as you don’t have a specific area or room set aside for work purposes.
- You can claim any expenses associated with running your business from home. These expenses can include electricity for lighting or aircon used only for work purposes.
- You can claim any work-related phone calls and phone rental along with costs associated with the internet.
- You can claim the full cost of office equipment or decline in value for items depending on their costs.
Keeping Records
It is essential that you keep precise records of your home-office expenses to avoid issues in the future. Records can be:
- Receipts: This can also include any written evidence of your expenses including depreciating assets.
- Dairy Entries: You can record all minor expenses on a dairy. This includes expenses where you cannot get any receipts or proof of purchases. However, the total amount classified under this entry should not be more than $200 with per item costs being less than $10. You will also need a diary to record and estimate usage of equipment over a representative four week period.
- Itemised account records: This can be obtained from your phone record company. However, if you cannot get an itemised record, you will have to maintain an itemised phone account that identifies work-related calls from personal calls.
- myDeduction: This app provided by the ATO makes it easier to keep accurate income and expenses record in one place.
Tax Office Rate per Hour
An alternate method to record keeping would be using a fixed rate of 45 cents for every hour you work from home. You can incorporate all your home-office related expenses, in particular, heating, lighting and decline in value of furniture and other equipment. However, you cannot make additional claims for individual expenses if you claim under using this method.
It is pivotal to not that using a portion of your house as a principal place of business can have significant repercussions on your tax situation. If you’re unsure as to what you can claim, a tax lawyer can advise you.
