Working from Home
With remote work remaining a common arrangement for many Australians, its important to understand how to claim tax deductions for your working from home (‘WFH’) expenses.
To claim WFH tax deductions, you must:
Be working from home to fulfil your employment duties, not just doing minimal tasks like occasionally checking emails or taking calls
Incur additional expenses as a direct result of working from home
Have records to substantiate your claims
There are two ways to calculate a Work from Home deduction. The deduction is the biggest amount of the Fixed Rate Method or the Actual Cost Method.
The Fixed Rate Method
The current rate is 70 cents per hour for each hour you work from home.
To use the fixed rate method, you must:
Work from home while carrying out your employment duties or carrying on your business
Incur additional running expenses as a result from working from home
Keep records of the hours spent working at home for the whole income year via timesheets, a logbook, your roster or diary entries
Keep records that show the work-related portion of your expenses.
Here’s what’s included under the fixed rate WFH deduction method:
Internet expenses
Energy expenses (electricity and gas) for heating and cooling, lighting and powering electronic devices
Mobile and home phone expenses
Stationery and computer consumables (like printer paper and ink).
It’s important to understand that you can’t claim additional separate deductions for any of the above expenses under the fixed rate method. For example, if you use your mobile phone while working from home, you can’t claim your mobile bill as a separate deduction - this expense is covered under the 70 cents per hour fixed rate.
While the rate covers many common expenses, you can still claim additional deductions for:
The decline in value (depreciation) of home office equipment and furniture used for work (items costing more than $300)
Immediate deductions for home office equipment and furniture used for work (items costing less than $300)
Repair and maintenance costs for home office equipment
Cleaning expenses for a dedicated home office (if applicable)
Any other running expenses not covered by the fixed rate.
One of the benefits of the revised fixed rate method is that you no longer need a dedicated office space to use this approach. You can work from any area in your home and still claim the fixed rate deduction.
You must record the total hours you work from via a timesheet, logbook, roster or diary.
You must retain records of all your additional running expenses, like phone, internet and utility bills, and hold onto them for five years.
The Actual Cost Method
The actual cost method allows you to claim the exact expenses you incur when working from home. While this method requires more detailed record-keeping, it may result in a larger deduction if you have significant home office expenses.
To use this method, you must:
Incur additional running expenses as a result of working from home
Keep detailed records (receipts and other written evidence) showing the amount spent on expenses, the amount spent on depreciating assets used while working from home and the percentage of work-related use for your expenses and assets
You also need to keep a record of the hours you spend working from home via either:
A record of the total number of hours spent working from home for the whole income year via timesheets, a logbook, your roster or diary entries; or
A diary or logbook showing your WFH hours over a continuous four-week period.
It’s important to note that you can’t claim additional expenses if other members of your household (who are not working from home) are in the same room as you while you’re working from home. So, if you work in the living room while your family members watch TV, you can’t claim the running costs for heating or cooling, because you’re not incurring any additional costs.
What you can claim under the actual cost method
Home office running costs
The work-related portion of:
Electricity and gas for heating, cooling, and lighting
Cleaning expenses for a dedicated work area
Phone and internet expenses
Computer consumables and stationery
Decline in value of depreciating assets
Depreciation of:
Office furniture (desks, chairs, bookshelves, etc)
Computers, laptops, and tablets
Printers and scanners
Other electronic equipment used for work
Record-Keeping Requirements
Regardless of which method you choose, good record-keeping is essential.
For the fixed rate method:
A record of hours worked from home (via timesheet, diary, roster, or similar)
Evidence of expenses for any additional deductions claimed outside the fixed rate
For the actual cost method:
Receipts for all expenses claimed
Evidence of how you calculated the additional running expenses as a result of working from home
A record of hours worked from home
Documentation showing the work-related use of assets