Tax deductions for Home Office expenses 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.
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 of equipment.
If your home is used as a place of business, (normally this would exclude employees), 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 may also be reduced by the proportion of work-related use. Employees are generally not able to claim occupancy costs.
Place of business
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)
Phone and internet expenses
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.
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. Acceptable 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.
Records and Proof
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.
“Working” while watching MKR or even the ABC News doesn’t count; 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.
Hourly Rate Method of Estimating Home Office Deduction
45 cents per hour to 30 June 2018
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 45 cents per hour to cover electricity and gas (for heating, lighting and cooling) and the depreciation of office furniture applicable until 30 June 2018.
From 1 July 2018 (i.e. from the 2018-19 tax year) the rate has been revised upwards to 52 cents per hour.
Hourly rates are revised from time to time:
- From 1 July 2018 – 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 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
- 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 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 2019-06-12