Work from home tax deductions

The Covid-19 pandemic has caused a global shift in the way people work. While working in an office used to be a reasonable assumption for most jobs, especially corporate ones, that is no longer the case.

Even as the number of cases of the virus in Australia decreases, many people still opt to work from their homes or a remote space instead of the office.

By working from home, you save the cost of commuting to work if you would otherwise take public or private transportation.

However, there are other costs incurred by working from home including internet, electricity and phone costs. Depending on the tasks you are required to do, you may even need to invest in expensive equipment in order to carry out your work activities from home.

As explained below, some of these costs may be eligible for tax deductions.

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Eligibility for work from home deductions

Any employee can claim tax deductions on expenses incurred from working from home if:

  • They used their own money to cover the expenses;
  • The expenses are directly related to their work activities; and
  • They have documentation or evidence to support the claim.

Claimable expenses

  • Electricity costs including heating, cooling, and running your computer in the designated working space in your home
  • Phone and internet expenses
  • Office supplies such as paper, ink, and stationery
  • Office equipment such as a printer, desk, chair and computer. Claims for these items can be the full cost of up to $300, or the decline in value (for items over $300).

Unclaimable expenses

  • Rent or mortgage interest
  • Water or council rates
  • Snacks or beverages
  • Childcare or children’s education costs
  • Anything that has been reimbursed by your employer

Calculating your expenses

The process of calculating your work from home expenses can be difficult and requires a lot of diligent recordkeeping.

Fortunately, the ATO has put out a shortcut method for taxpayers to calculate their work from home expenses which is available until 30 June 2021. Using this method, you can simply apply for a deduction of $0.80 per hour of documented work. 

Alternatively, you can attempt to calculate the work portion of your total running expenses and make a claim on that. This method will be more difficult as you will need to be mindful to keep track of every expense you wish to make a claim on. The ATO will require documentation for each of these expenses as well.

The latter method would be best done with help from your tax agent to make sure everything is accurate and can be defended with evidence. More information on the actual cost method can be found on the ATO’s website.

Need help?

If you require any assistance with calculating your work from home expenses or lodging your tax returns, feel free to give us a call at 02 7208 5065 or contact us on our website.

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