Tax deductions for Home Office expenses when working from home can be claimed if your home is a place of business, or if it is used for income earning activities.
This requires evidence of a more-than-incidental use of an otherwise private area of the house
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If your home is not a place of business, then your claims are restricted to running expenses only. This may include a portion of your heating, lighting, and telephone, electricity consumption, internet expenses and depreciation and repairs of equipment.
If you are working from your home used as a place of business, (normally this would exclude you simply acting as an employee), then further deductions for the relevant proportion of attributable occupancy expenses such as rent, interest, rates and insurance may be also claimable, but in that case the capital gains residence exemption (for home owners) may also be reduced by the proportion of work-related use. Employees are generally not able to claim occupancy costs.
Working from home during a Covid19 lockdown
During a Covid-19 lockdown it is necessary to work from home, with no alternative place of business. Could this give rise to additional tax deductions? This is discussed with reference to specific cases in “Working from home during a COVID-19 lockdown: can you claim a tax deduction for rent? – Velocity Legal.
Reminder from the ATO: Keep records when working from home – to maximise opportunities for tax deductions, keep a record of hours worked and receipts for any relevant expenditure.
The Tax Office provides guidance for determining whether a home, or an area within it, is being used as a place of business. Factors to consider include whether:
- the area is clearly identifiable as a place of business;
- the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally;
- the area is used exclusively or almost exclusively for carrying on a business; or
- the area is used regularly for visits of clients or customers.
(Source: TR 93/30)
Mobile and home phone and internet expenses can be claimed provided there is sufficient evidence to support the requirement for the work-related usage and a reasonable basis of apportionment is used for calculating the work-related use.
Apportioned business internet usage can be estimated based on records of actual usage maintained for the year or in stable usage circumstances a representative 4 week period will suffice.
Calculations are expected to take into account such factors as bundled services, personal usage, periods of annual leave and use by other persons. Calculation examples are provided in PS LA 2001/6.
Claiming for telephone up to $50
For incidental work use of a taxpayer’s telephone where the claim is not more than $50, the ATO accepts claims based on the the following estimates:
- work calls from a landline: 25 cents per call
- work calls from a mobile: 75 cents per call
- work-related text messages sent from a mobile: 10 cents per text
Claiming more than $50
To establish a claim of more than $50, a 4-week representative period of expenditure can be used to establish a percentage claim of the total cost of calls and data contained in itemised billing records. Records include diary entries, electronic records, and bills, along with some evidence from the employer that work from home or work-related calls are expected.
There is an overall requirement that the basis of claims calculations be “reasonable”.
For substantiating a claim,
- keep records which support the actual costs incurred, and which indicate the correct non-deductible apportionment
- keep a representative four-week diary to establish a pattern of usage. If there is no regular pattern, then records of the duration and purpose of each occasion would need to be kept.
A claim is not allowed where there is no additional cost incurred (such as a working area shared by normal domestic activity) or if the income producing activities are merely incidental.
Shortcut method 80 cents per hour for all costs, starting 1 March 2020
Claims for periods from 1 March 2020 can be calculated at the rate of 80 cents per hour.
This method can be used for the periods
- 1 March 2020 to 30 June 2020; and
- years ending 30 June 2021 and 2022.
The optional 80 cents rate method covers all costs associated with working from home, including heating and cooling, electricity, mobile phone, internet and depreciation of office equipment etc. The 80 cents method precludes any other home office costs being added to the claim.
By contrast the 52 cents per hour claim method only covers electricity, gas and depreciation, allowing other costs to be separately identified (see below).
Under the 80 cents method the only records required to be kept are time records, showing the hours worked from home, and there is no requirement for a dedicated work area.
52 cents per hour (fixed rate method)
The fixed rate of 52 cents per hour can be used in any of the years 2018-19, 2019-20 or 2020-21.
If the diary basis of claim is used (i.e. the pattern of work-related usage has been established), the Tax Office accepts a fixed rate of 52 cents per hour to cover electricity and gas (for heating, lighting and cooling) and the depreciation and repairs of office furniture.
If applicable, mobile phone and internet costs (see above methods) as well as computer consumables and stationery can be separately added to the claim.
The 52 cent rate method continues to be available when the 80 cent short-cut method is not selected.
Previous Years Fixed Rates
Hourly rates for the fixed rate method are revised periodically. The most recently published rate is 52 cents per hour, which has been in place since 1 July 2018.
- Years from 1 July 2018 to 30 June 2021 – the rate is 52 cents per hour
- Years from 1 July 2014 to 30 June 2018 – the rate is 45 cents per hour
- Years from 1 July 2010 to 30 June 2014 – the rate is 34 cents per hour
- Years from 1 July 2004 to 30 June 2010 – the rate is 26 cents per hour
- Years from 1 July 2001 to 30 June 2004 – the rate is 20 cents per hour
- Home Office Expenses – ATO
- Practical Compliance Guideline PCG 2020/3: Claiming deductions for additional running expenses incurred whilst working from home due to COVID-19
- Article: Proving deductions for home office expenses, mobile phones and internet
- Article: Working from home – which home office expenses are deductible?
- PS LA 2001/6 Home office and electronic device expenses (contains calculation methods and examples)
- Claiming mobile phone, internet and home phone expenses
- Tax return item D5 – Other work-related expenses 2021
- Tax return item D5 – Other work-related expenses 2020
- Tax return item D5 – Other work-related expenses 2019
- Tax return item D5 – Other work-related expenses 2018
- Tax return item D5 – Other work-related expenses 2017
- Tax return item D5 – Other work-related expenses 2016
- TR 93/30 Income tax: deductions for home office expenses
- Home office expenses calculator
- Claiming a tax deduction for expenses for a home-based business
This page was last modified 2021-10-15