Working from home: What can I claim on tax?

How to claim working-from-home expenses for FY2022/23

The ATO has reduced its blanket shortcut method for claiming household running expenses, from 80 cents per hour to 67 cents per hour that you worked from home.

To be eligible to claim your home office running expenses using the 67 cents per hour shortcut method you need to:

• Be working from home (if you're still going to your workplace each day, you can't can't claim these home running costs)
• Have incurred the expense yourself without being reimbursed the cost by your employer
• Have a record of your hours spent working from home (payslips, rosters, time sheets or diary logs)

You don't need to have a dedicated work area in your home to be eligible to claim using this method.

Example of the 67 cents per hour shortcut method

Let's say you've been working from home full time this entire year (from 1 July 2022 to 30 June 2023), and haven't spent any days in the office. You've been working from home 8 hours a day, 5 days a week, for 52 weeks.

Your employer has not given you any money back to help with the cost of your home Internet or energy bills.

After removing weekends and 9 public holidays, that's 251 days working from home. At 8 hours a day, that's 2,008 hours. You can claim 67 cents for each of these hours, which works out to be a deduction of $1,345.36

How to claim on tax if you're working at home

Here's how to claim using the new shortcut method in 4 steps:

1. Check eligibility. Check you're eligible to claim your working-from-home expenses using the checklist above.
2. Calculate your working hours. Calculate how many hours you've spent working at home between 1 July 2022 and 30 June 2023. Remember to exclude weekends, public holidays or any extra days you took off work.
3. Calculate your deduction. Multiply the number of hours worked by 0.67, which will give you the dollar amount that you're eligible to claim for all running expenses.
4. Add a reference to your return. Include a note when submitting your return that you've used this 67 cents per hour method to make the claim.

You're not forced to claim your expenses using this new shortcut method, and you can still choose to claim using the standard / previous method if you want to. However, the standard method does take a bit more time to calculate your expenses.

Option two: Actual expenses method

If you carry out some or all of your work from a home office, you may be entitled to a deduction for the following expenses. This is the case for individuals who previously worked from home before the coronavirus pandemic. You can choose to use the actual expenses method instead of the above shortcut method, if you want to.

What you can claim on tax:

• Home office equipment: For equipment such as standing desks, printers, computers or telephones, you can claim for the full cost (for items valued up to $300) or you can claim for the decline in value (for items costing $300 or more).
• Work-related phone use: If you need to use your personal phone for work at home, you can claim a portion of your phone bill as well as the cost of the headset itself. You can check out how to claim your home Internet and mobile bills here.
• Energy costs: You can claim a portion of your electricity bills for heating, cooling and lighting.
• The cost of repairs: This includes the cost of repairs to any home office furniture or fittings.
• Cleaning expenses: If you can show cleaning expenses directly related to the office space.

What you can't claim on tax:

• Occupancy. In most cases, you can't claim occupancy costs such as rent, mortgage repayments or interest and council rates.
• General household items. Things like tea, coffee and toilet paper aren't directly related to earning an income so you can't claim the cost of these.

Example: Actual expenses method

Instead of using the 67 cents per hour method, you can choose to calculate the actual costs. This involves keeping a log of how many hours you worked from home, and figuring out what percentage of your expenses are for work versus personal use.

For example, let's say you added up your working hours and figured out you worked from home 30% of the time. You could then claim 30% of the actual cost of your energy bill, your internet bill, phone bill etc as a tax deduction.

The amount you can claim for office equipment will depend on the amount of time you use them for work purposes. For instance, if you bought a computer which you use half for work purposes and half for private purposes, you can claim only 50% of the cost or decline in value.

The type of deduction you claim depends on the cost of the asset. For items that don’t form part of a set and are valued at $300 or less, or form part of a set that together costs $300 or less, you can claim an immediate deduction for their cost. For items that cost more than $300, or that form part of a set that together cost more than $300, you can claim a deduction for their decline in value.

This method is a lot harder to calculate, and you need to be prepared to show your working and calculations to the ATO. However if you spend more than 50% of your time at home working, it could allow you to claim more using this method.

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Business run from home: Deductions for businesses who operate from home

It's important to understand that a business that operates from home is different to an employee who works from home. If you run your business from home, you can claim income tax deductions for a portion of the costs owing, maintaining and using your home for this use. However, when you sell your home you may be liable for capital gains tax.

How do I know if my home is my place of business?

Your home is considered your place of business if you run your business from home and a room is set aside exclusively for your business activity. For instance a business consultant whose main office is in their home where they have clients visit them or a doctor who has their surgery or consulting room at home, where their patients visit them.

What deductions can I claim if I run a business from home?

If you run your business from home, you may claim both running and occupancy expenses.

Running Costs:

• Utility costs: The expenses related to running the home office utilities such as electricity and gas.
• Business phone costs: If you’ve used a phone for business purposes, you can claim for the rental and calls, but not the installation costs. If you used the phone for both business and personal use, you can claim a deduction for business calls.
• Depreciation of office plant and equipment: You can claim for the decline in value of equipment such as desks, chairs and computer monitors.
• Depreciation of curtains, carpets and light fittings: You can claim for the decline in value of these materials and fixtures.

For these running costs, you can use a floor plan to allocate the proportion of items to private and business use. If a floor plan isn’t appropriate, other methods may apply. For instance, you could compare power bills from before you began operating to after you commenced operation. When determining these costs, remember to account for holidays and illness.

Occupancy Costs:

• Costs associated with owning or renting house: This may include rent, mortgage interest, insurance and council rates. You can claim the portion of these costs that relate to the room that’s used as your place of business. Often this is calculated by the floor area (as a proportion of the floor area in your whole property).

Will I need to pay Capital Gains Tax (CGT) if I use my home for business purposes?

Generally when you sell your home, you can ignore a capital gain or loss that you make, which is known as the ‘main residence exemption.’ If your home is your place of business, you generally can’t obtain the full main residence exemption.

However, you could be eligible for a partial exemption. To work out how much capital gain is not exempt, you generally need to work out the following:

• The proportion of floor area of your home that’s set aside to produce income
• The period of time you used it for this purpose

If you need help calculating the correct amount of tax deductions you're legally eligible to claim, an online tax agent can help.