Can you claim Home office Expenses?
Does your employer make you do work from home? Are you eager to know the expenses you can claim on this year’s tax? Here, you will get to know a complete guide about home office expenses.
If you are wondering whether you can claim your home office expenses or not, then the answer will be yes. But, it is only possible if your home is not a business place, you may be eligible to claim for running expenses only. These expenses can be lighting, telephone, electricity consumption, internet bill, etc.
In some situations, when you perform some of your work duties at home, you may be eligible to claim a deduction for home office expenses. ATO (Australian Taxation Office) allows a $0.52/hour deduction for the time you spend performing your office duties at home. This claim covers the charges of heating, lighting, cooling, desk, and chair.
You can claim for other home office expenses separately. These include stationery, phone, internet, computer/laptop, filing cabinets, and others. Also, the private or domestic expenses connected with your home are not allowed to claim deductions for tax purposes.
As per the general rule, the area of your home used for income-producing activities is termed a ‘place of business’. So, in some cases, the partial deduction may be allowed to rent, mortgage interest, water rates, house insurance, etc.
These factors can determine whether your area of work at home is set to be characterised as a ‘place of business’ or not.
- The area is undoubtedly recognised as a place of business
- The area is not appropriate for private or domestic purposes, even if it is associated with home
- The area is used exclusively for carrying work duties
- The area is used frequently for client/customer visits.
It is true that many times, we need to open our home computer or laptop to check emails or we use our home phone to make some calls to the clients or customers from time to time. But, if these activities are a regular occurrence for you, then the best idea is to set a specific area in your home to work. This decision will not only help in keeping focused on your work but also provide some bonus to you.
This is what we are talking about here. You can claim deductions for your home office expenses. Always keep in mind that valuable tax deductions cover the expenses associated with working from home.
What home office expenses can you claim?
If you are working from home, you have the right to claim a deduction for expenses you incur. These expenses are:
- Electricity expenses include heating, cooling, and lighting of the area you are using for working at home or for running tools, equipment, or systems you are using for work.
- Cleaning cost of the area that you are using dedicatedly for work
- Phone and internet expenses
- Additional computer items, such as printer paper, ink, and stationary
- Use of home office equipment such as computers, laptops, printers, phones, furniture, etc. Here, you can claim the full cost of these products for up to $300 or claim for depreciation for products more than $300.
What home office expenses you cannot claim?
If you are working from home, it does not mean you can claim for all expenses you hold while performing your work duties at home. You cannot claim for:
- The cost of coffee, tea, milk, and other household items that your employer may provide you when you are at work
- The cost related to your children and their education, can be the expense of their online learning or buying equipment, like iPads, desks, and others
- The products or items that you have been reimbursed for already, which means the expenses that are paid directly by the employer are allowed to claim
- The time that you have spent not working on your job duties, such as time spent on teaching your children, lunch break, and all
- Occupancy expenses, such as rent, mortgage interest, rates, etc.
How to claim expenses?
The running expenses can be claimed in two options:
- At the rate of 52 cents per hour
- The amount of total expense you experienced through an established pattern of use
52 cents per hour
You have the right to claim 52 cents per hour for working from home towards the home office running expenses. These expenses will include all expenses that are listed above. For this, you have to calculate the standard working hours at home for four weeks and then multiply this number of hours by 13 to get the annual working hours. It is so because there are 52 weeks in a year, so when you divide it by 4, the answer comes out to be 13.
Suppose you have calculated an average four week period of hours for working from home is 25. Now, multiply 25 with 13; you will get 325 hours over the income year when you work from home. Now, you have to claim 52 cents per hour working from home; it means you will claim $169 towards your home office running expenses.
You cannot claim a deduction for expenses if it does not involve an additional cost. For example, you are working from home in the living room where your family members watch the television. Due to this reason, it is important to get a dedicated area in your home if you want to claim home office expenses.
Pattern of use
To claim the actual costs involved in working from home, you have to keep a record that displays your pattern of use. ATO gives importance to a diary that contains the information for the day and time you have used for home office work. Make sure to keep your dairy for at least four weeks in a financial year. Then, add all the details of the associated expenses to claim some portion, such as lighting, heating, furniture, cleaning, etc.
This method is usually used for making bigger claims than the 52 cents per hour method. But, the pattern of use method is more complicated as everything is managed with date and time. You can consult your tax agent to determine the best method for you.
If you are looking forward to claiming home office expenses, you must take the help of an expert for the right method of keeping records. Also, he/she will guide you for the eligible deductions and maximise your refund.