If it is necessary for you to perform work related duties from your abode, you may be able to claim a deduction for home office expenses.
There are two types of home office expenses, Running and Occupancy expenses.
Should an area of your home be specifically set out for the purpose of performing work related duties, we can deduct a portion of our expenses based on the area of our office as a portion of our abode. The area basis applies for expenses such as Gas, Electricity and cleaning expenses.
In addition we can also claim a deduction for the following running expenses:
-Depreciation of office furniture and equipment (computers, desks etc)
-Depreciation of curtains, carpets and fittings in home office
Unlike gas, electricity and cleaning expenses, the above expenses may be deducted based on their business use percentage (ie curtains, furniture for the home office may be deducted at 100% of their value).
Although it is advisable to have an area of your home specifically set out for working from home, we may still deduct running expenses without a dedicated home office.
One particular method is the cents per hour method, where we may claim 34 cents for every hour work related duties are performed. This may be calculated with a diary for actual hours worked or using a 4 week snapshot multiplied to account for the whole year.
Another method we may use is to compare our energy bill before we were required to work from home with our current bill and deduct the difference (also for gas and cleaning).
As long as the method we use to calculate the additional running expenses is a true, fair and accurate representation of the running expenses incurred from our home office, ATO will accept the method.
Occupancy expenses are those such as council rates, rent, interest on mortgage repayments etc. These expenses may only be claimed if your home is your “primary place of business” (should you rent out a separate premises for you business, you may not claim occupancy expenses).
Should your business income include PSI or if you are employed as a PAYG worker, you may not claim occupancy expenses.
Working as an employee or receiving PSI income limits us only to only deducting “running expenses of our home office.”
It would be advisable to refrain from claiming occupancy expenses if you own your place of residence due to capital gains complications (ie if your home office is 30% the size of your house you will be required to pay capital gains on 30% of the profit on sale even if it is your main primary residence).
For more information regarding home office expenditure, please visit the ATO website.