How to claim home office expenses

You may be working from home and want to know what you can claim on tax, so details of what to claim and how you can calculate claims is below.

If you want to listen rather than read, a quick video is at https://www.loom.com/share/8fe33b8a97544c24b0ae34c07f3c1d2d

Hourly Rate

The ATO is increasing the hourly rate to claim running expenses to 80 cents per hour for all home office running expenses between 1st March 2020 to 30th June 2020, up from 52 cents per hour.

You need to do is keep a record of the hours you worked from home as evidence.

You can claim using the hourly rate instead of recording all of your actual expenses for heating, cooling, lighting, cleaning and the decline in value of furniture.

Running expenses

If you work from home, you can claim the work-related proportion of your running expenses. These include:

• home office equipmentincluding computers, printers, telephones and furniture and furnishings. You can claim the
• full cost for items up to $300
• decline in value for items over $300
• heating, cooling and lighting with the hourly rate
• the costs of repairs to your home office equipment, furniture and furnishings
• cleaning costs
• other running expenses including computer consumables (for example, printer paper and ink) and stationery.

Capital Gains Tax Implications

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home. CGT may apply if you are running a business from home or claiming occupancy expenses (like mortgage interest repayments or rates).

What you can claim

Check out the table below for the expenses you can claim as well as the three ways you can work at home, including::

Note 1: Generally, an employee who works at home and who does not have a dedicated work area will not be entitled to claim running expenses or their claim for running expenses will be minimal. This is because they can only claim the additional running expenses incurred as a result of working from home – see Example 2 below

Calculating running expenses

There are two ways to calculate your running expenses:

• you can claim a fixed rateof 52 cents per hour (and 80 cents per hour between 1 March and 30 June) for each hour you work from home instead of recording all of your actual expenses for heating, cooling, lighting, cleaning and the decline in value of furniture.
• you can calculate your actual expenses.

Occupancy expenses such as rent and mortgage interest and capital gains tax

If your home is your principal place of business, you may be able to claim occupancy expenses.

Employees are generally not able to claim occupancy expenses. Occupancy expenses include:

• rent
• mortgage interest
• property insurance
• land taxes

You can only claim the work-related proportion of your occupancy expenses in two very limited circumstances where:

the space in the home is a place of business, and not suitable for domestic use – for example, a doctor or dentist surgery or a hairdresser studio in the home

no other work location is provided to an employee by an employer and the employee is required to dedicate part of their home to their employer’s business as an office – you can claim the portion of these costs that relate to a clearly identified place of business.

If you claim occupancy expenses, you don’t qualify for the capital gains tax (CGT) main residence exemption for the part of your home that you use for work. If you use your home as a place of business there may be CGT implications when you sell it.

Calculating occupancy expenses

If you are eligible to claim occupancy expenses, you can work them out by calculating the:

Total expenses × floor area × percentage of year that part of your home was used exclusively for work

If the area you use for work takes up 15% of your home and you used it for work for the whole of the year, you can claim 15% of your occupancy expenses.

ATO Examples

Example 1: a dedicated room for work

Julia is a lawyer who works as an employee for a large city firm. Julia’s employer has agreed that she can work from home two days per week.

She has a home office that she works in on the days she does not travel to the city. Julia and members of her family also use the home office for private purposes, including personal use of the computer and to store household items.

Julia can claim the running costs, but only the portion of the expenses that relate to her work-related use of the home office. In working out her work-related use of the home office and computer, Julia must take into account her own private use and also her family’s private use of the home office and computer.

 Example 2: no set work area

James is a high school teacher. From time to time, James works in the lounge room at home to mark tests and prepare end of term reports. He does not have a room set aside exclusively for work.

If James’s family is not at home or not in the lounge room with him, he can claim the specific running costs associated with the work he does at home. This includes the work-related portion of the decline in value of the laptop he used to prepare the reports and the additional cost of lighting, heating or cooling his lounge room. He is also able to claim for the cost of the electricity required to power his laptop for the hours that he uses it to work from home.

If his family was in the lounge room watching television at the same time that he was in there marking tests and preparing end of term reports, James could not claim the additional cost of lighting, heating and cooling his lounge room. However, he can still claim the cost of electricity required to power his laptop for the time he spent working and the work-related proportion of the decline in value of the laptop he uses to prepare reports.

Example 3: chooses to work from home

Natalie is a web developer for a large company and usually works from her office in the city. While Natalie is not required to work from home, her employer supports it. Natalie is not provided with the work equipment to use at home, so she uses her own laptop, internet connection, mobile phone and thumb drive and completes her work in her study. She is not reimbursed by her employer for these costs.

Natalie is entitled to claim running costs including the work-related proportion of the decline in value on her laptop, her office desk and chair, and a percentage of lighting, heating and cooling. This is because it reflects her work-related use of the office, as well as the cost of using her own internet connection and mobile phone for work. Natalie needs to apportion these expenses to take her private use into account.