With one in three taxpayers now claiming home offices expenses, it is no wonder the ATO is keeping a close eye on employees who work away from the work premises. In the 2016/2017 tax returns about $8 billion was claimed for home office expenses.
Mark Chapman, director of tax communications for accountant H&R Block says “Being able to claim these expenses depends on whether your home is your place of work or business and if you have an area set aside exclusively for work activities.”
The table below outlines the ways you can work at home and the expenses you can claim:
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 the claim for running expenses will be minimal. This is due to the fact that they can only claim the additional running expenses incurred as a result of working from home.
There are two ways to calculate your running expenses:
Fixed rate of 52 cents per hour;
Calculate your actual expenses.
The fixed rate of 52 cents per hour is based on average energy costs and the value of common furniture items used in home business areas. If using this method you do not need to record all your actual expenses for heating, cooling, lighting, cleaning and the decline in value of furniture, instead you would record your actual hours spent working at home for the year or a diary for a representative four-week period to show your usual pattern of working at home.
To calculate actual expenses if you have a dedicated work area, you:
record the total expenses for lighting, cleaning, heating and cooling for your home and electricity for depreciating assets used for the year. This will generally be your electricity bills, gas bills (if you have gas heating) and cleaning invoices;
work out the proportion of that expense that relates to your dedicated work area by calculating the floor area of the area you use for work as a percentage of the total floor area of your home;
work out the percentage of the year you used that part of your home exclusively for work – in working this out, you must take into account the use of that area by other members of your household – for example, if the other people in your household use the room because that is where the computer is located you must take all of their use, along with your personal use, into account when coming up with the work-related percentage.
If you did not have a dedicated work area, the additional expense for lighting, heating and cooling and electricity should be calculated by determining the actual cost of running each unit you used per hour and multiplying that by the hours you spent working at home. Generally the amount will be small. This will be particularly so where other people are using the area at the same you are working there. In those circumstances there will be no additional cost for lighting or heating and cooling .
You calculate your deductions for decline in value by working out the amount of depreciation for each item for the year and claim the proportion of that amount which reflects your work-related use.