Home office expenses

Source: https://www.ato.gov.au/

If you’re an employee who works from home, you may be able to claim a deduction for expenses you incur relating to that work. These can be additional running expenses such as electricity, the decline in value of equipment or furniture and phone and internet expenses.

If your home is your principal place of business, you should refer to running your business from home.

In most cases, if you are working from home as an employee, there will be no capital gains tax (CGT) implications for your home.

Expenses you can’t claim

There are some expenses you can’t claim a deduction for as an employee. Employees who work at home can’t claim costs:

• for coffee, tea, milk, and other general household items your employer may otherwise have provided you with at work
• related to children and their education including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
• that you’re reimbursed for, paid directly by your employer or the decline in value of items provided by your employer – for example, a laptop or a phone.

Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates.

Calculation methods

There are three ways of calculating home office expenses depending on your circumstances. The methods are the:

• Shortcut method (80 cents) – only available 1 March to 30 June 2020
• Fixed-rate method (52 cents)
• Actual cost method

You must meet the record-keeping requirements and working criteria to use each method.

Use our Home office expenses calculators to help work out your deduction.

Shortcut method

We have introduced a shortcut method to simplify how you calculate your deduction for working from home. This method is temporary and only available for the period 1 March to 30 June 2020. All employees working from home in this period can use this method.

Using this method, you can claim 80 cents per hour for each hour you work from home during the period 1 March to 30 June 2020.

You can choose to use this rate if you:

• are working from home to fulfil your employment duties, not just carrying out minimal tasks such as occasionally checking emails or taking calls
• have incurred additional running expenses as a result of working from home.

The shortcut method covers all of your work from home expenses, such as:

• phone expenses
• internet expenses
• the decline in value of equipment and furniture
• electricity and gas for heating, cooling and lighting.

If you use this method, you can’t claim any other expenses for working from home.

You don’t need to have a dedicated work area to use this method. However, you must keep a record of the number of hours you have worked from home. This could be a timesheet, roster, a diary or documents that set out the hours you worked from home.

You don’t have to use the shortcut method, you can choose to use one of the existing methods to calculate your deduction. You can use the method or methods that will give you the best outcome as long as you meet the working criteria and record-keeping requirements for each method.

If you had a work from home arrangement before 1 March 2020, you will need to use one of the existing methods to calculate your deduction for the period 1 July 2019 to 29 February 2020.

The shortcut method includes a decline in the value of all items. If you choose to use this method there is no requirement to separately calculate the decline in value of equipment or depreciating assets. However, as you may combine methods or use a different method in later years it’s important to keep the:

• purchase receipts for depreciating assets or equipment you use when working from home
• records of how you calculated your work-related use of the asset
• your decline in value calculations.

For more information about the shortcut method, see employees working from home during COVID-19.

Fixed rate method

You can claim a deduction of 52 cents for each hour you work from home for the work-related expenses you incur for additional running expenses. The fixed-rate covers all expenses you incur for:

• the decline in value of home office furniture and furnishings – for example, a desk
• electricity and gas for heating, cooling and lighting
• the cost of repairs to your home office equipment, furniture and furnishings.

To claim using this method, you must keep records of either:

• your actual hours spent working at home for the year
• a diary for a representative four-week period to show your usual pattern of working at home.

You can apply the four-week representative period across the remainder of the year to determine your full deduction amount. However, if your work pattern changes you will need to create a new record.

To use this method, you need to have a dedicated work area, such as a home office when you work from home.

This method doesn’t include the following, so you will need to separately calculate your work-related use for:

• phone expenses
• internet expenses
• computer consumables and stationery – such as ink
• decline in value of equipment – such as phones, computers and laptops.

To claim the work-related portion of these expenses you must have records such as:

• receipts or other written evidence that shows the amount spent on expenses and depreciating assets you purchased
• phone accounts identifying your work-related calls and private calls to work out your percentage of work-related use for a representative period
• a diary that shows
  • a representative four-week period of your usual pattern of working at home
  • any small expenses ($10 or less) that you can’t get a receipt for totalling no more than $200
  • your work-related internet use
  • the percentage of the year you used depreciating assets exclusively for work.

Actual cost method

Under the actual expenses method, you can claim the additional running costs you directly incur as a result of working from home. This may include the following expenses:

• electricity and gas for cooling, heating and lighting
• the decline in value of home office furniture (desk, chair) and furnishings,
• the decline in value of phones, computers, laptops or similar devices
• phone expenses
• internet expenses
• cleaning (if you use a dedicated area for working)
• computer consumables and stationery – such as ink

If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. For example, if the area you use for work is a common area of the home such as a lounge room and that area is being used by other members of your household for another purpose (such as, family members watching television) at the same time you’re working, you won’t be incurring any additional costs for lighting, heating or cooling as a result of working in that room.

To calculate the work-related portion of your actual expenses you must have records. You can:

• keep a record of the number of actual hours you work from home during the income year
• 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 and
  • keep receipts showing the amount you spent on the assets
  • show the percentage of the year you used those depreciating assets exclusively for work – you can claim for the portion of the decline in value that reflects your work-related use of the depreciating assets
• work out the cost of your cleaning expenses (if you have a dedicated work area) – for example, a room set up as a home office, by adding together your receipts and multiplying 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
  • use of the home office by other family members
• 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.
• work out the cost of your phone or internet plan expenses – where you receive an itemised bill, you need to determine your percentage of work use over a four-week representative period. See, Claiming mobile phone, internet and home phone expenses.
• work out the cost of computer consumables and stationery by keeping receipts for the items purchased.

You must take into account other members of your household when you work out your expenses. If a member of your household is using the same area of the house or the same service when you’re working, you must apportion your expenses accordingly.

To claim a deduction for an asset that cost $300 or more, you need to calculate the decline in value for both the period you:

• owned the assets during the income year
• used the assets for work-related purposes.

You can use the depreciation and capital allowances tool to calculate your deduction for the decline in value of equipment, furniture and furnishings that cost more than $300, use the depreciation and capital allowances tool to work this out.

You can use the myDeductions tool in the ATO app to keep track of your expenses and receipts throughout the year. It’s a fast, easy way to capture information on the go by taking and uploading photos of receipts.

Examples – comparing methods

Example 4: Linus’s deduction using the Actual costs method

Records for change in circumstances

Regardless of the method you choose to use to calculate your expenses for working from home, you will need to have records.

If your circumstances change part way through the income year – for example, your usual pattern of work from home changes – you will need to keep separate records to show this change.

If you use the four-week representative period to calculate your usage over the income year, you will need to either:

• complete a new four-week representative period to show your usage in your new circumstances
• keep separate records for the period your circumstances changed.

For example, if you usually work from home one day a week and due to an emergency situation such as COVID-19 or bush fires you’re required to work from home for a period, you will need to keep separate records for both situations. This includes:

• the actual hours you’ve worked from home due to the emergency situation
• your usual working from home arrangements.

Your four-week representative period will no longer be valid in these circumstances.