A changing workplace culture along with a global trend towards more flexibility in work means that the role of the traditional brick-and-mortar office is getting diminished by the day. Today’s workplace is a laptop or a tablet and you can carry it on the go.
Australians also happen to be workaholics. A past study showed that Aussies worked the longest hours in the developed world. A significant section of the Australian workforce still clocks 50-hour weeks or more and that means many employees are taking their work home in the evenings during weekdays and even on weekends.
If you have set up a home office and are doing more work from home, you will be incurring various work-related expenses for which you can claim tax deductions. 50% of Australians who work from home use the internet. There are also electricity costs to grapple with, cost of phone use, computers and computer maintenance costs, cost of stationery and your home office furniture such as desks, chairs and tables. All of these are workplace or business related expenses for which you can claim tax deductions.
If you incur these expenses before June 30, you can claim them as tax deductions in July. Most people generally ignore these expenses even though they could amount to a significant tax relief. Many regular workers are unlikely to even maintain records of work-related purchases at home unless they are putting in 40-hour weeks working from home.
Here is a list of some of the tax deductions that you can claim if you are working from home or running your business from home:-
For comfort and general peace of mind, your home office must have an optimal working environment just like your traditional office. If it is too cold outside, it will have to be heated to make it bearable. During summer, the home office has to be cooled and you will incur the cost of running the air conditioner during your work hours.
It also has to be well lit. Good lighting is not just for seeing your surroundings; it also has a positive impact on your productivity. All of these will amount to significant energy bills and you can claim tax deductions for the costs that you incur on the time spent working in your home office. The claims must strictly account for the time spent working in the home office; you can’t file work-related claims for bills incurred in the rest of the house during your private time.
Depreciation Costs for Furniture and Home Office Fittings
If the home office is kitted with furniture such as desks, chairs and shelving, you can claim tax deductions for the depreciation in the value of these assets as it relates to your work activity. This can be in the form of an asset write-off factored over the effective life of these assets.
Depreciation of office equipment
Some people purchase various kinds of equipment for their home office such as printers, scanners, tablets, and laptops among others. You can depreciate the cost of this equipment over their lifetime and then claim a tax deduction annually on the depreciation.
Low cost capital acquisitions
If you have made a purchase for business assets that cost less than $300, you can claim instant tax deductions on these expenses. If you buy more expensive (that cost more than $300) home office assets such as furniture and equipment, you can jot down the value over an extended period of time so you can claim tax deductions for the decline in value of these.
Other home office running costs
There are various other home office running costs for which you can claim tax deductions. These include the following:-
- The home office cleaning costs
- Repair costs for the furniture and furnishings used in the home office.
- Equipment repair costs
- Phone and internet costs related to your work at your home office.
The Expenses you can’t claim
Not all expenses are tax deductible. There are people who stretch it a bit in order to maximize on their tax deductions. If your home office is part of your main home and you are not paying rent for it separately, you can’t claim a part of your home mortgage or a part of your house rent as a home office business expense.
For tax purposes, it is advisable to have an exclusive room in the home that is designated as the home office where you can easily track your expenses. If you are using another dual purpose room such as a bedroom, lounge room or living room as your home office, then you can only claim deductions for the duration during which you had an exclusive access to the room.
How much money can you claim?
There isn’t really a cap on the amount of money that you can claim as deductions for your home office expenses. As long as the amount has been calculated accurately and there are documents such as receipts and invoices to substantiate your claims, then you can go after any amount of money that you are entitled to.
The records to keep
There are expenses records that will be key to substantiating your deduction claims. These include:-
- Diary entries made to document the small expenses such as the $10 or $20 expenses. This is allowable if the expenses do not to total to more than $200. You can use a diary entry for expenses for which you do not have any documentary evidence.
- Receipts and other forms of documentary evidence of expenses.
- An itemized record of phone calls from which you can easily track the work-related phone calls.
If you don’t have up to date records of all the expenses you have incurred when working from home, you can still use the ATO fixed rate of 45 cents per hour which covers all expenses incurred when running a business or working from home including the phone bills, energy bills and asset depreciation costs. If you will be using the ATO rate, all you will have to do is keep a record of the number of hours you spend working in your home office and then multiply this by 45 cents.