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Home Office Tax Deductions

Home Office Tax Deduction - Online Tax AustraliaIn situations where taxpayers perform some of their work duties from home they may be entitled to claim a deduction for expenses incurred.

The Taxation Office allows a deduction of $0.52 per hour for the time spent working at home. This claim is designed to cover the cost of heating, cooling, lighting, desk and chair. 

Other expenses such as stationery, telephone, internet, computers, filing cabinets etc can all be claimed separately.

As a general rule, expenses associated with your home are of a private or domestic nature and do not qualify as deductions for tax purposes. An exception to this general rule is where part of the home is used for income producing activities and has the character of a ‘place of business’. In such cases some of the occupancy expenses incurred for the home ‑ such as rent, mortgage interest, municipal and water rates, land taxes and house insurance – may be partially deductible.

The following factors, none of which is necessarily conclusive on its own, may indicate whether or not an area set aside has the character of a ‘place of business’:

  • 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 client or customer visits.

An example is a salesperson in the country whose city-based employer does not provide an office for them.

COVID-19 Home Office Tax Deductions Shortcut Method

The ATO has implemented a special working from home tax deduction shortcut in the wake of the COVID-19 pandemic. This shortcut is designed to cater for the additional expenses incurred during the restriction period, without the usually required detailed record keeping.

From 1 March 2020, taxpayers can choose to claim a rate of $0.80 cents per work hour for work undertaken at home, instead of the standard $0.52 per hour outlined above.

However, it is important to note that this higher per hour rate represents the complete home office claim. It is not just for heating, cooling, lighting, cleaning and the decline in value of office furniture, but also all other home office work related expenses, including phone and internet expenses, computer consumables, stationery and the decline in value of a computer, laptop or similar device.

As with all claims, the taxpayers must have spent the money themselves and not have been reimbursed. The claim must be directly related to earning income, and there must be a record of hours worked at home during this period to substantiate the claim.

Claims for working from home expenses prior to 1 March 2020 cannot be calculated using the shortcut method, and must use the pre-existing working from home approach and requirements.

The ATO will review the special arrangement for the next financial year as the COVID-19 situation progresses.

Example

A taxpayer is an employee who works as an administrator. The taxpayer starts working from home on 16 March as a result of COVID-19 and replaces her face-to-face meetings with online video conferencing.

The taxpayer has just purchased a new laptop, desk, chair and stationery to use at home. They also want to claim some additional gas, electricity, phone and internet costs due to working from home.

Under the shortcut method, the taxpayer can now claim all expenses under a rate of 80 cents per hour. All she needs is her timesheets showing the hours worked at home.

The taxpayer can also decide to claim using existing working from home calculations. Under that method, they can claim the desk, chair, gas and electricity under the 52 cents per hour, but would need to work out the decline in value of the laptop, and calculate the work-related portion of the laptop, stationery, phone and internet expenses separately.

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