What can I claim?
Over the past few years, working from home has become a reality for many people. While there are many benefits to working from home, it can result in additional utility and other home office related expenses. Thankfully, many of these additional expenses can be claimed as a deduction in your tax return.
Prior to 1 July 2022, there were three methods that could be used to claim working from home expenses. However, new legislation was released on 16 February 2023 which changes the way home office expenses can be claimed from 1 July 2022. It is important that you know and understand these changes as we can no longer claim work from home expenses on the same basis we used to.
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. We will then look at what methods you can use to claim work from home expenses, the records you must keep in relation to work from home expenses, and expenses that can never be claimed as work from home expenses.
There are three eligibility criteria to be met to claim work from home expenses. 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, and have records that show that you incur these expenses.
If you meet these three criteria, from 1 July 2022, there are two methods that can be used to calculate your work from home expenses. The first method you can elect to use is the revised fixed rate method.
The Revised Fixed Rate Method:
The revised fixed rate method allows you to claim 67 cents per hour for each hour you work from home during the relevant income year. This rate covers the additional running expenses you incur for:
Home and mobile internet expenses
Home and mobile phone usage expenses
Electricity and gas for heating, cooling and lighting
Stationery and computer consumables, such as printer ink and paper
If you are using the revised fixed rate method, you cannot claim an additional separate deduction for these expenses. For example, if you use your mobile phone while working from home as well as when not working from home, you cannot use the revised fixed rate method for hours you work from home as well as claiming a separate deduction for the use of your mobile phone while not working from home.
When using the revised fixed rate method, you may claim a separate deduction for the work-related use of technology and office furniture, for example, desks, chairs and computers. If the item cost $300 or less and you use it for a work-related purpose, you can claim an immediate deduction for the cost in the year you buy it. If the asset cost more than $300 or forms part of a set that costs more than $300 in total, you can claim a deduction for the decline in value of the asset(s) over the effective life of the item(s).
When you use your depreciating assets for both work and private purposes, you need to apportion your decline in value deduction as you can only claim the work-related portion as a deduction.
While previously you had to have a dedicated home office if you wanted to use the fixed rate method to claim work from home expenses, this requirement no longer applies with the revised fixed rate method.
In a few select cases, you may be able to claim occupancy expenses and cleaning expenses where you have a dedicated home office. To find out more, visit the ATO website.
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 (or forms part of a set that together 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.
Electricity and gas for 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, data 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.
Records that must be kept to claim work from home expenses:
| Revised Fixed Rate Method | Actual Cost Method |
A record of the number of hours you work from home during the entire income year* | Yes** | Yes, if you only work from home sporadically |
A representative four-week period to show your usual pattern of working from home | No** | Yes, if you work from home on a regular and consistent basis |
At least one record for each of the additional running expenses you incur that the rate per work hour includes e.g. if you incurred electricity and stationery expenses, keep one quarterly bill for your electricity expenses and one receipt for your stationery expenses. | Yes | No |
Records for depreciating assets from the time you buy them, that show the amount spent on the depreciating assets, and the percentage of the year you use the depreciating assets exclusively for work, such as a diary or similar document. | Yes | Yes |
How you worked out the amount of your deduction | Yes | Yes |
Records must be kept for five years from the date you lodge your tax return.
* Here is a printable logbook which you can use to record your work from home hours.
** Where previously you could keep representative records of the number of hours you worked from home when using the fixed rate method, under the revised fixed rate method you must keep a record of the actual number of hours worked from home. However, note that for the 2022-23 income year only, you may keep a representative record of the total number of hours worked from home during the period from 1 July 2022 to 28 February 2023, and a record of the total number of actual hours worked from home for the period 1 March 2023 to 30 June 2023.
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. For more information, visit the ATO website.
For more information about the deductions allowable for home office expenses, visit the ATO’s Practical Compliance Guide 2023/1 Claiming a deduction for additional running expenses incurred while working from home – ATO compliance approach.
To read more about the methods available prior to 1 July 2022, read our previous article relating to home office expenses here.