Home Office Expenses
If you're an employee who regularly works from home, you may be able to claim a deduction for expenses relating to that work. These are generally home office running expenses, and phone and internet expenses.
In limited circumstances you may also be able to claim occupancy expenses. One such circumstance is if your home is your principal place of business. If that is the case you should refer to running your business from home. The other situations where you may be entitled to claim occupancy expenses are addressed below.
For a summary of this content in poster format, see Employees working from home (PDF 262KB)This link will download a file.
Expenses 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, which include:
- home is your principal place of work and you have a dedicated work area that is unlikely to be suitable for domestic use
- home is not your principal place of work but you have a dedicated work area – for example a study
- you work at home but you don't have a dedicated work area – for example, you use a room with a dual purpose such as a lounge room.
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 due to the fact that they can only claim the additional running expenses incurred as a result of working from home -
If you work from home, you can claim the work-related proportion of your running expenses. These include:
home office equipment
including 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
- 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
Calculating running expenses
There are two ways to calculate your running expenses:
Instead of recording all of your actual expenses for heating, cooling, lighting, cleaning and the decline in value of furniture, you can claim a deduction of 52 cents for each hour you work from home.
This rate is based on average energy costs and the value of common furniture items used in home business areas.
To claim using this method keep records of your actual hours spent working at home for the year, or keep a diary for a representative four-week period to show your usual pattern of working at home.
You need to separately work out all other home work area expenses, such as:
- phone and internet expenses
- computer consumables and stationery
- decline in value on computers or other equipment.
To calculate actual expenses if you have a dedicated work area, you:
- keep a record of the number of actual hours you work from home for the year, or keep a diary for a representative four-week period to show your usual pattern of working at home
- work out the decline in value of depreciating assets by keeping receipts which show the amount you spent on the assets and work out the percentage of the year that you used those depreciating assets exclusively for work. You can claim a deduction for the proportion of the decline in value that reflects your work-related use of the depreciating assets
- work out the cost of your cleaning expenses by adding together your receipts and multiply it by the floor area of your dedicated work area (floor area of the dedicated work area divided by the whole area of the house as a percentage). Your claim should be apportioned for any private use of your home office and any use that other family members make of the home office
work out the cost of your heating, cooling and lighting by working out the following
- the cost per unit of power used - refer to your utility bill for this information
- the average units used per hour - this is the power consumption per kilowatt hour for each appliance, equipment or light used
- the total annual hours used for work-related purposes - refer to your record of hours worked or your diary for this information.
You must also take into account the use of this area by other members of your household, if applicable and apportion your expenses accordingly.
If you don't have a dedicated work area, your expenses for heating, 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 worked from home. The amount of the additional expense is generally small. This will particularly be so where there are other people using the area at the same time you are working. In those circumstances there is no additional cost for lighting, heating or cooling.
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 not only her own private use but also her family's private use of the home office and computer.
End of example
Example 2: no set work area
Alastair is a high school teacher. From time to time, Alastair works in the lounge room at home, for example, to mark tests and prepare end of term reports. He does not have a room set aside exclusively for work.
If Alastair'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, such as the work-related portion of depreciation 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 the electricity required to power his laptop for the hours that he uses it to work from home.
If Alastair's family was in the lounge room watching television at the same time he was in there marking tests and preparing reports, he can only claim the cost of electricity required to power his laptop while working as that is the only additional cost he incurs as a result of working from home.
End of example
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 depreciation on her laptop, her office desk and chair, and a percentage of lighting, heating and cooling that 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.
End of example
Occupancy expenses include:
- mortgage interest
- property insurance
- land taxes
Employees are generally not able to claim occupancy expenses. 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.
Phone and internet expenses
You can claim a deduction for work-related proportion of your phone and internet expenses. You must have paid for these costs and have records to support your claims.
There are two ways to calculate your phone and internet expenses:
You need to keep records for a four week representative period in each income year to claim a deduction of more than $50.
Calculating phone and internet expenses
Claim up to $50
If your work use is incidental and you are not claiming a deduction of more than $50 in total, you may make a claim based on the following, without having to analyse your bills. The rates you can use to work out the cost for your work calls are:
- 25 cents for calls made from your landline
- 75 cents for calls made from your mobile
- 10 cents for text messages sent from your mobile.
If you have a phone or internet plan where you received an itemised bill, you need to determine your percentage of work use over a four-week representative period that you can then apply to the full year.
You need to work out the percentage using a reasonable basis. This could include:
- the number of work calls made as a percentage of total calls
- the amount of time spent on work calls as a percentage of your total calls
- the time you spent, or data used for work purposes compared to your private usage and that of all members of your household.
If you have a bundled of non-itemised plan, you need to identify your work use for each service over a four-week representative period during the income year that you can then apply to the full year.
Records you must keep
You must keep records of your expenses, such as:
- a diary you have created to work out how much you used your equipment, home office and phone for business purposes over a representative four-week period
- receipts or other written evidence, including for depreciating assets you have purchased
- diary entries to record your small expenses ($10 or less) totalling no more than $200, or expenses you can't get any kind of evidence for
- itemised phone accounts from where you can identify work-related calls, or other records, such as diary entries if you don't get an itemised bill.
Sourced from: ato.gov.au