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Tax Return Tips For Australian Claiming Work-From-Home Expenses

Tax Return Tips For Australian Claiming Work From Home Expenses

The world of work has changed dramatically, with many Australians now working remotely from home offices. 

This shift brings flexibility and convenience, but it also raises questions about tax deductions.

KPG Taxation understands important guidance to ensure you properly claim these work-from-home deductions and avoid any issues with the Australian Taxation Office (ATO).

Therefore we are sharing this blog to explain everything you need to know about claiming work-from-home expenses in Australia.

Eligibility To Claim Work-From-Home Expenses

First and foremost, you must meet certain criteria to be eligible to claim a deduction for working from home. 

The ATO requires that you:

  1. Are working from home to fulfil your employment duties, not just occasionally checking emails or making phone calls? Your home must be considered your actual workplace.
  2. Have incurred additional running expenses as a direct result of working from home that you kept records for.
  3. Calculate your expenses using an approved ATO method (more on this shortly).

If your home is your primary place of business because you are self-employed, you may have additional deductions available. However, this article focuses on employees claiming home office expenses.

Understanding "Additional Running Expenses"

The Australian Taxation Office (ATO) considers general household expenses, like electricity and internet, and private costs. However, the additional usage due to working from home can be claimed as a deduction. 

This applies to expenses like:

  • Energy:  The additional electricity or gas used for heating, cooling, and lighting your home office.
  • Internet and Phone:  The extra data used or call minutes incurred for work purposes. Both home and mobile phone expenses qualify.
  • Stationery and Office Supplies:  Items like printer ink, paper, notebooks, and pens used specifically for work can be claimed.

Choosing Your Calculation Method - Fixed Rate vs. Actual Cost

For the 2022-23 and future tax years, the ATO allows two different methods for calculating your home office deduction:

1) Fixed Rate Method (Simpler & Faster)

This method provides a set rate per hour worked from home to cover additional running expenses. The current rate for Taxation year 2024 is 67 cents per hour. 

This rate includes expenses like electricity, internet, stationery, and computer consumables. 

Here’s what you can claim under the fixed rate method:

  • 67 cents per hour worked from home: This covers the additional running expenses mentioned earlier. You cannot claim these expenses elsewhere in your return.
  • Decline in value of depreciating assets (optional): This applies to work-related wear and tear on equipment like computers, furniture, and software. You can use the ATO’s depreciation and capital allowances tool to calculate this.

Things to remember with the Fixed Rate Method:

  • You don’t need a dedicated home office to qualify
  • You must keep records of:
    • Total hours worked from home (for the year)
    • Additional running expenses incurred (e.g., phone bills, electricity bills)
    • Any depreciating assets used for work (and the work-related percentage of use)

2) Actual Cost Method (More Detailed)

This method involves calculating the actual expenses you incur due to working from home. It requires keeping detailed records of:

  • Hours worked from home: This could be the total hours or a representative 4-week period if your work hours are consistent.
  • Additional running expenses:  Keep receipts or bills for phone, internet, electricity, and relevant office supplies.
  • Calculation method: Maintain documentation showing how you arrived at your deduction amount.

Choosing The Right Method - Fixed Rate vs. Actual Cost

The fixed-rate method is generally simpler and faster, particularly if your work-from-home expenses are reasonable. It removes the need to track every expense properly.

However, the actual cost method might be more beneficial if:

  • You have significant work-from-home expenses exceeding the benefit of the fixed rate.
  • You want to claim deductions for the decline in value of specific assets used heavily for work (beyond what the fixed rate covers).

Expenses You Can't Claim

While working from home offers flexibility, there are limitations on deductible expenses. 

Here’s what you cannot claim:

  • General household items: Coffee, tea, milk, and other everyday household items, even if your employer might provide them in an office setting.
  • Children’s education expenses: Costs related to your children’s education, such as equipment or online learning subscriptions.
  • Employer-provided items: Laptops, mobile phones, or any equipment your employer provides are not claimable.
  • Reimbursed expenses: If your employer reimburses you for work-from-home expenses, you cannot claim them again on your tax return.

Conclusion

Working from home can offer a valuable work-life balance, and the Australian tax system acknowledges the additional expenses this might incur. But if you are uncertain about your situation, you can consult tax agents at KPG Taxation who will ensure you claim everything you’re entitled to. 

We ensure you understand your eligibility and by utilising the appropriate method for claiming work-from-home deductions, you can maximise your tax benefits come Tax Time 2024. 

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