Working from home may mean you are incurring extra costs for power, internet and other work-related expenses. Are you claiming these expenses on your tax return? Talk to us to help maximise your tax return.
Working from home is becoming the norm for many businesses, either due to lockdowns or greater employee flexibility. It’s important to think about the deductible expenses that you may be able to claim when working from home and make sure you include them in your tax return.
There are three ways of calculating your working from home expenses.
ATO Shortcut Method for Working from Home Expenses
For part of the 2020 financial year and all of the 2021 and 2022 financial years, there is a shortcut calculation for people who have had to work from home due to COVID-19 temporarily. This allows for a flat rate of 80 cents per hour for employed working time. The shortcut simplifies the calculation but doesn’t allow for any additional expense claims.
To use the shortcut method, you must keep a record of actual hours worked from home. The hours should align with timesheet records submitted to an employer. You don't need to keep records of actual expenses for things like power or the internet.
To continue to claim deductions for working from home expenses in future financial years, you will need to use one of the established ATO methods of either fixed rate or actual costs.
ATO Home Office Fixed Rate Method
To use the fixed rate, you must have a dedicated work area or separate room used as an office and incur extra costs due to working from home. You will also need records of other expenses not covered by the fixed rate and the number of hours spent working for the whole financial year.
The fixed rate is 52 cents per working hour and includes running expenses for the decline in value of office furniture, electricity and gas, and cleaning. You can claim on top of the fixed rate for other work-related costs such as telephone, internet and office equipment.
You must keep records of hours worked and work-related expenses and a diary to show work usage for the internet and assets. You’ll also need to work out the percentage of floor space for your office against the entire dwelling.
ATO Home Office Actual Cost Method
To use the actual cost method, you must incur extra costs as a result of working from home and have records to prove work-related use of expenses and assets. As with the other methods, you’ll need to record the number of hours worked from home. You’ll also need bills showing actual amounts paid for expenses.
ATO Home Office Online Calculator
Use the ATO home office expenses calculator to check the allowable deductions. The online calculator allows you to choose either the fixed cost or the actual cost method. Once you have the deduction amount from the calculator, enter this on your tax return or give it to us to include. Keep the printout of the calculator result and remember to keep documents for all expenses.
Talk to us to make sure you’re claiming all the allowable working from home deductions to maximise your tax return.