Around 3.5 million employed Australians work from home, and more than a million run their own home-based businesses. If this includes you, it may be possible to claim tax deductions for the time you have been working at home, either at the dining room table, or in your dedicated office.
How you claim for legitimate deductions will depend on your circumstances.
Deductions for running expenses in a home office:
Working from home on a regular basis may allow you to claim home office expenses like electricity, gas, and phone bills, even if you are a salaried employee. But it does not mean you can claim the entire household bill. For example, if you dedicate 15 per cent of the total area of your home for work purposes (i.e. in a home office or workshop), you can claim that percentage of key running expenses, like heating or air-conditioning.
Likewise, you can claim a proportion of phone or internet use according to how much time is used for work-related purposes. Similarly, you can claim against a depreciating asset used for business purposes, for example, an office chair, a printer, or computer.
Small business owners
If you qualify as a small business owner, you can immediately write off most depreciating assets (like computers, equipment, cars, or tools) that cost less than $25,000 or $30,000 (depending on the purchase date). However, the depreciating asset must be calculated only for the amount of business use that was incurred – and you will need records to prove it. If you would like more information about the 2018/19 Instant Asset Write Off tax policy, see the dmca July newsletter, or go to the ATO site at https://www.ato.gov.au/business/depreciation-and-capital-expenses-and-allowances/in-detail/depreciating-assets/simplified-depreciation—rules-and-calculations/?anchor=Instantassetwriteoff
Keeping records and claiming expenses
Those who run genuine home-based businesses may be able to claim expenses and depreciation, but they will still need to account for the time spent in the home office (for example, a plumber may only be able to claim one day a week at home preparing invoices at the kitchen table, because the rest of the time is spent out of the home at jobs on-site.)
You can choose to calculate your claim according to the proportion of office space used in the family home and by the actual expenses, or by a ‘fixed rate’ method on a per hour basis. The ATO has recently revised the figures and this year the ‘acceptable’ fixed rate for these expenses has increased to 52 cents per hour, based on actual use or an established pattern of use. For both methods, you must keep a diary to record the amount of time used in your home office for work purposes for at least four weeks over a year, demonstrating a normal pattern of work.
Expenses that can be claimed for working at home (as a non-principal office).
Deductions for occupancy expenses
If you run an income-producing business from home (i.e. you are not a salaried employee) you may also be able to claim occupancy expenses. To do this the ATO expects you to have an area that is exclusively dedicated to business purposes. You can then claim (proportioned) deductions for expenses like rent, mortgage interest payments, council rates and insurance premiums for that room, workshop or office. You need to measure the defined workspace to determine how much you can claim. It’s also worth noting that even though a family home is free of capital gains tax, if you claim occupancy expenses in a tax return, you will still need to pay capital gains on the part of your house that you used for business purposes if you ever sell the property.