How to Claim your Home Office Tax Deduction

March 23, 2020

Home office expenses are going to increase dramatically for the 2019/2020 tax returns and future, as a result of the coronavirus crisis. Despite the crisis the ATO will still expect you to only claim what you’re entitled to claim within your tax return.

If you are currently working from home, it’s good to know what you are entitled to claim. In order to claim you are responsible to keep detailed records to support your claim(s).

If you are working from home, which is not your principle place of business, the deductions you may be able to claim are dependent on whether, you have a dedicated work area or not.

A dedicated work area

Would be a room such as a study or spare room that is set aside primarily or exclusively for work activities, but your home isn't your principal place of business, i.e. working at home due to COVID-19 Virus.

No dedicated work area

Is where you do not have an area or room primarily or exclusively set aside for work, but you are working at home due to the coronavirus.

The following table sets out the deductions you can and can’t claim:

Expenses	Home is Principal Workplace with a Dedicated Work Area	Home is not your Principle Workplace, but you have a Dedicated Work Area	You work at home but have No Dedicated Work Area
Running expenses	Yes	Yes	No (See Note 1)
Work-related phone & internet expenses	Yes	Yes	Yes
Decline in value of a computer (work related portion)	Yes	Yes	Yes
Occupancy expenses	Yes	No	No

Note 1: Generally, an employee who works at home and who does not have a dedicated work area will not be entitled to claim running expenses or their claim for running expenses will be minimal. This is due to the fact that they can only claim the additional running expenses incurred as a result of working from home

Running expenses

The running expenses includes costs such as electricity, phone, decline in value of plant and equipment, cost of repairs to furniture and furnishings, cleaning costs and such costs as computer consumables (eg printer paper, stationery, etc).

Employees that do not have a dedicated work area and work at home will not be entitled to claim running expenses or the claim for running expenses will be minimal. This is due to the fact that they can only claim the additional running expenses incurred as a result of working from home.

Calculating your entitlement to claim

There are two ways to calculate your running expenses:

1. Fixed rate per hour

The easiest method is to use the "rate per hour" method. This where the ATO allows a flat rate of 52¢ per hour to cover home-office expenses for heating, cooling, lighting and the value of furniture, without the need to keep details of actual costs.

You will be required to keep track of the time spend working from home or keep a diary for a representative four-week period to show your usual pattern of working at home. We highly recommended keeping a time sheet so that you can best track your time.

In addition to claiming the 52¢ per hour, you need to have evidence of any other expenses incurred for phones and the internet, computer consumables and stationery and for the depreciation of any computers or other equipment (Keep a copy/record of all your receipts and invoices).

2. Actual expenses

The other method of claiming a deduction where you have a dedicated work area is to claim the actual running costs. To make a claim on an actual basis you:

• keep a record of the number of actual hours you work from home for the year, or keep a diary for a representative four-week period to show your usual pattern of working at home

• keep records of the assets acquired and the tax depreciation that you are entitled to claim

• keep records of the cleaning expenses incurred and apportion it by the floor area of the dedicated work space

• work out the apportioned cost of your heating, cooling and lighting expenditure

Though this can be a little more time consuming, it is a lot more accurate. Laptops or phones provided by your employers while working at home cannot be claimed for tax purposes.

If you don't have a dedicated work area, your expenses for heating, cooling and electricity should be calculated by determining the actual cost of running each unit you used per hour and multiplying that by the hours you worked from home. The amount of the additional expense is generally small. This will particularly be so where there are other people using the area at the same time you are working. In those circumstances there is no additional cost for lighting, heating or cooling.

Additional information can also be found on the ATO’s website, click here to link to Home Office Expenses.

Please use this as a guide only as these rules are complex. Make sure you keep suitable and accurate records in order to may your claim in your 2019/2020 tax return.

Should you have any queries regarding any of these key measures, please do not hesitate to contact our office on 02 4272 3048.

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