Working from home: What can I claim on tax?
The ATO has extended its 80 cents per hour shortcut method for claiming your home office expenses on tax for the 2020-21 financial year. Here's how it works.
We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!
Whatever your reason is for working from home, you'll be pleased to know you can claim your home office running expenses on tax. This even includes things like your home energy and Internet bills.
How to claim working-from-home expenses for FY2020/21
Because so many Australians have still been working from this past year home due to COVID-19, the ATO has extended its easy shortcut method for claiming household running expenses. All Australians working from home will be able to claim 80 cents per working hour for all their running costs, for the hours worked at home between 1 July 2020 and 30 June 2021.
To be eligible to claim your home office running expenses using the new 80 cents per hour shortcut method you need to:
- Be working from home due to coronavirus (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 80 cents per hour shortcut method
Let's say you've been working from home full time this entire year, and haven't spent any days in the office. You've been working from home eight hours a day, five days a week, for 52 weeks. You haven't taken any sick days in this period, but there were seven public holidays where you didn't work. Your employer has not given you any money back to help with the cost of your home Internet or energy bills.
Between 1 July 2020 and 30 June 2021 you spent 253 days working from home (this number excludes seven public holiday days). At eight hours per working day, that's a total of 2,024 hours spent working from home during the eligible claim period.
You're eligible to claim 80 cents per working hour, which means you can claim a $1619.20 tax deduction for all your home running expenses when lodging your 2020/21 tax return.
How to claim on tax if you're working at home due to coronavirus
Here's how to claim using the new shortcut method in 4 steps:
- Check eligibility. Check you're eligible to claim your working-from-home expenses using the checklist above.
- Calculate your working hours. Calculate how many hours you've spent working at home between 1 July 2020 and 30 June 2021. Remember to exclude weekends, public holidays or any extra days you took off work.
- Calculate your deduction. Multiply the number of hours worked by 0.80, which will give you the dollar amount that you're eligible to claim for all running expenses.
- Add a reference to your return. Include the note: "COVID-19 hourly rate" when submitting this deduction in your tax return.
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.
What's the standard method for claiming home office expenses?
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 this method instead of the newly announced 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.
Option one: 52 cents per hour method
You can claim 52 cents per hour that you worked from home towards all your home office running expenses (listed above). To do this, you can calculate your standard working hours over a four week period then multiple that by 13 to get your yearly working hours (as 52 weeks per year divided by 4 week blocks is 13).
Let's say you calculated for an average four week period you work from home for 20 hours. Multiplying this by 13, you calculate that you worked from home for 260 hours over the income year. You can claim 52 cents per working hour, which means you can claim $135.20 towards your home office running costs.
Option two: Actual expenses method
Instead of using the 52 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.
An online tax agent can help you claim eligible deductions and maximise your refund.
The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.
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.
- 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.
- 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.
More guides on Finder
CBA’s new 0.99% green home loan: Who’s eligible + how to get it
CommBank has launched its 0.99% green loan following a pilot in February this year. Here’s how to get this ultra-low home loan rate.
Dreading bill shock this winter? Here’s how to minimise home heating costs
SPONSORED: Real, actionable tips on how to get lower heating bills every year.
5 tech deals to make working from home better in lockdown: Save $213
These hot offers will help you upgrade your home office set-up and improve your lockdown experience.
Farm insurance can provide the protection Australian farmers need. It can include ✓ building insurance ✓ crop insurance ✓ livestock insurance
Boost your 2021 tax return: Top tips for a bigger refund
It's tax time! Finder's money writers share their tips to claim deductions on everything from your home office, car and insurance to your mortgage.
Best lighting for studying and working from home in Australia
We’ve read hundreds of customer reviews to shine the spotlight on the best lights and lamps for studying and working from home.
SONOS Roam review | Can the home sound experts go portable?
Can the SONOS Roam successfully lead the company from home theatres into the Bluetooth speaker system or not?
Tax traps: What the ATO is checking this year
These are the claims you need to be extra-careful about in 2021.
5 donations you can’t claim on tax this year (and 3 you can)
You can only claim a tax deduction for donations to charities and organisations that meet a certain set of criteria.
Saving not splurging: 35% of Australians plan to stash tax return
Australians aren’t in the mood for splurging this tax season, with 6.8 million people planning to put their tax return into savings.
Ask an Expert