Please note that this article is superseded as of 16 February 2023 and applies up to 30 June 2022. For up to date information, see our new article.
Working from home has become a reality for a lot of people, especially with the current Covid-19 pandemic. When it comes to preparing your tax return, that can be a benefit though as there are expenses you can claim in relation to working from home.
Before looking at what you can claim in relation to working from home expenses, you first have to work out if you are eligible to claim these expenses.
There are two eligibility criteria: firstly, you must be working from home to fulfil employment duties. Occasionally checking your emails or taking work related phone calls would not be considered fulfilling your employment duties. You must also incur additional expenses as a result of working from home.
There are three methods to use when claiming work from home expenses. The first is the fixed rate method.
The Fixed Rate Method
The fixed rate method is an amount per work hour for additional expenses. The current rate is 52 cents per hour. To use this rate, you must have a dedicated work area that you use when you work from home, as well as records that show the number of hours spent working from home in the whole income year.
The fixed rate method includes the following expenses:
Decline in value of home office furniture and furnishings
Electricity and gas for heating, cooling and lighting
Cleaning your home office
In addition to using the fixed rate, you can also claim the work-related portion of the following expenses, if these expenses are incurred as a result of working from home:
Phone, data and internet expenses
Computer consumables and stationery e.g. ink
Decline in value of depreciating assets other than home office furniture and furnishings used for work purposes e.g. computers
To claim these additional expenses, you must have records that show the work-related portion of expenses not covered by the fixed rate.
The Actual Cost Method
Another method to use when claiming work from home expenses is the actual cost method. As can be gathered from it’s name, when using the actual cost method you work out your deduction by calculating the actual expenses you incur. These may include:
Decline in value of depreciating assets
If the asset you are using cost $300 or more, you can only claim a deduction for their decline in value over their effective life. If it is also used partly for private purposes, you can only claim the work-related portion of the decline in value as a deduction.
If the asset cost less than $300, you can claim the total cost of the asset in the year it was purchased. If it was used partly for private purposes, you can only claim the work-related portion of the cost of the asset.
Cleaning expenses
If you have a dedicated work area, you must work out the cost of your cleaning expenses and apportion your claim for any private use of the home office, or use of the home office by other members of your household.
As an example, if you have a room set up as a home office, you will need to add together all your receipts, multiply by the floor area of the dedicated work area, divided by the whole floor area of the house. Then reduce this amount by the percentage of private use by yourself and the use of the office by other household members.
Heating, cooling and lighting
Work out the cost of your heating, cooling and lighting by using the cost per unit of power used, average units used per hour, and total annual hours used for work-related purposes
Phone and internet
If you receive an itemized phone or internet bill, you need to work out your work-related use over a 4-week representative period. You can use your work-related percentage for the representative period to work out your expenses for the whole income year.
Computer consumables and stationery
Work out this cost by using receipts for the items you purchase. If used for private and work-related purposes, you can only claim the work related portion of the expense.
The Shortcut Method:
The final method you can use to calculate your WFH expense is the shortcut method, although this method is only available between 1 March to 30 June 2020 for the 2019-20 income year, and for the 2020-21 and 2021-22 income years.
Using this method you can claim 80 cents for each hour you work from home. You can’t claim any other expenses for working from home, even if you bought new equipment. This method covers all your work from home expenses, including phone and internet expenses, decline in value of equipment and furniture and electricity.
Expenses that can never be claimed:
Below is a list of expenses that can never be claimed as working from home expenses:
Coffee, tea, milk and other general household items, even if these are provided to you at work
Costs that relate to your children’s education
Items your employer provides e.g. laptop or phone
Any items where your employer pays for or reimburses you for the expense
Occupancy expenses including mortgage interest, rent, rates, land taxes, house insurance premiums. There are a few cases where occupancy expenses can be claimed, but claiming them can lead to capital gains tax implications for your home. They can only be claimed if it was necessary to work from home because your employer doesn’t provide you with an alternative place to work from, and the area of your home that you use for work is used exclusively or almost exclusively for work purposes.
Records that must be kept to claim work from home expenses:
| Fixed Rate Method | Actual Cost Method | Shortcut Method |
a. Record of the number of actual hours you work from home during the income year | Yes or b if you regularly work from home | Yes or b if you regularly work from home | Yes |
b. A representative four-week period to show your usual pattern of working from home | Yes or a if you don’t work from home on a regular basis | Yes or a if you don’t work from home on a regular basis | No |
c. Receipts or other written evidence that shows the amount spent on expenses and depreciating assets you purchase | Yes | Yes | Yes, the receipts for depreciating assets or equipment you use when working from home for future years |
d. Phone accounts identifying your work-related calls and private calls to work out your percentage of work-related use for a four-week representative period | Yes | Yes | No |
e. A diary that shows your work-related internet use | Yes | Yes | No |
f. A diary that shows the percentage of the year you use your depreciating assets exclusively for work | Yes | Yes | No |
