As of 2024, approximately 36% of Australians regularly work from home, according to the Australian Bureau of Statistics (ABS). With remote work now a significant part of the Australian workforce, understanding how to claim work-from-home expenses on your tax return has become vital.
The Australian Taxation Office (ATO) provides clear guidelines to ensure you claim what you’re entitled to, without overstepping the mark. Here’s a guide to understanding what you can claim, how to calculate your deductions, and how Hoffman Kelly can help you maximise your tax return.
Eligibility to Claim Work-from-Home Expenses
To claim work-from-home expenses, you must meet specific eligibility criteria:
- Work Requirement: You must be required to perform work duties from home, either full-time or part-time. This includes employees and self-employed individuals.
- Work Area: While a dedicated home office is not mandatory, having a clearly defined workspace can strengthen your claim.
- Expense Connection: Expenses must be directly related to your income-earning activities. Mixed-use items, like internet or phone bills, must be apportioned to reflect work-related usage.
- Record-Keeping: Detailed and accurate records are essential to substantiate your claim.
What Expenses Can Be Claimed?
While working remotely can offset petrol costs and commute times, it certainly can also increase certain household expenses. The ATO allows deductions for expenses directly related to your work, including:
- Utilities: Heating, cooling, and lighting for your home workspace.
- Phone and Internet: The work-related portion of your usage.
- Office Equipment: Items like desks, chairs, computers, or printers, including depreciation costs.
- Stationery: Paper, ink, and other work-related supplies.
However, personal expenses like coffee, tea, and general household items are not deductible.
How to Calculate Your Claim
Currently, the ATO offers two main methods for calculating your work-from-home expenses: Fixed Rate Method (67 cents per hour) and Actual Cost Method.
- Fixed Rate Method (67 cents per hour)
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- Key feature: Simplicity—no need to calculate actual costs for utilities.
- What you need: A record of hours worked (e.g., timesheets or a diary).
Introduced in the financial year beginning 1 July 2022, this method covers running expenses such as electricity, gas, phone, internet, and home office consumables. To claim using this method, you must keep a contemporaneous diary or similar records that document:
- The hours you worked from home during the year.
- Any changes in your working arrangements during the year.
These records should be retained for at least five years, as required by the ATO.
While the Fixed Rate Method simplifies calculations, it excludes:
- Depreciation of equipment; and
- Repairs, maintenance and cleaning costs to your home workspace;
So any of these costs which are incurred to earn your income can be claimed in addition to the fixed-rate claim.
- Actual Cost Method
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- Key feature: Higher potential claims for those with significant work-from-home expenses.
- What you need: Detailed records, including bills, receipts, and apportionment calculations.
This method calculates the precise work-related costs incurred in your workspace, typically using your home-office square meterage or worked hours. Here are the most commonly claimed under this method:
- Energy Expenses: Calculate the work-related portion of electricity and gas bills, using either square meterage of the workspace or hours worked.
- Phone and Internet: Determine the percentage used for work by keeping a log over a representative period (e.g., one month).
- Cleaning Costs: Include expenses for cleaning a dedicated work area.
- Depreciation of Equipment
How to Claim Depreciation
If you purchase equipment or assets for your home office, you may be eligible to claim depreciation to account for the decline in their value over time. Here’s how:
- Assets Under $300: These can be claimed as an immediate deduction in the year of purchase. Examples include small office accessories or low-cost tools.
- Assets Over $300: These must be depreciated over their effective life. The ATO provides depreciation rates for various items.
- Use the prime cost method (straight-line) or diminishing value method to calculate annual depreciation.
- Keep records of the purchase price, date of purchase, and evidence of how the asset is used for work purposes.
- Work-Related Use: If an asset is used for both personal and work purposes, you can only claim the work-related portion. For instance, if a computer is used 70% for work, only 70% of the depreciation can be claimed.
FAQ
Can I Claim Occupancy Costs (e.g., rent or mortgage interest)?
You can only claim these if your home is your primary place of business, such as a doctor living upstairs and operating a clinic downstairs. Employees generally cannot claim these expenses.
What Records Should I Keep?
Accurate record-keeping is essential to substantiate your claims. We recommend:
- Timesheets or diaries showing hours worked.
- Receipts for purchases and bills.
- A breakdown of how expenses are apportioned between work and personal use.
- For the Fixed Rate Method, a diary or log outlining the hours worked from home.
- For the Actual Cost Method, detailed calculations showing how expenses were apportioned for work use.
Let Hoffman Kelly Maximise Your Deductions
Navigating work-from-home deductions can be complex, but you don’t have to do it alone. At Hoffman Kelly, we specialise in helping Australians claim all their eligible deductions while staying compliant with ATO regulations.
Contact us today for personalised advice or assistance with your tax return. Whether you work from home full-time, part-time, or in a hybrid arrangement, we’re here to help you maximise your refund and simplify the process.
Article by Samual Hornick, Manager at Hoffman Kelly