Understanding Work-from-Home Deductions: A Guide to ATO Rules

Written by Lavinia Pera

As remote work becomes increasingly common, many Australians are seeking clarity on what work-from-home deductions they can claim on their tax returns. The Australian Taxation Office (ATO) has specific guidelines to help you maximise your deductions while ensuring compliance. Here’s a breakdown of the rules and what you need to know.

Eligibility to claim

To claim working from home expenses, you must:

  • be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls.

  • incur additional running expenses as a result of working from home.

  • have records that show you incur these expenses.

To calculate your deduction for working from home expenses, you must use one of the methods set out below.

Where you incur running expenses for both private and work purposes, you need to apportion your deduction. You can only claim the work-related portion as a deduction.

What Can You Claim?

1. Home Office Expenses:

  • Running Costs: You can claim a portion of your household expenses, such as electricity, internet, and phone costs. The ATO allows you to choose between two methods to calculate your deduction:

    • Fixed Rate Method: You can claim 67 cents per hour for each hour you work from home, which covers running costs and a portion of other expenses. Keep a record of your hours worked from home.

    • Actual Cost Method: If you have incurred specific costs, such as purchasing office furniture or equipment, you can claim the actual expenses. Ensure you keep receipts and calculate the work-related portion.

2. Office Equipment and Furniture:

  • Under the actual cost method above, if you purchase items specifically for your home office—like desks, chairs, or computers—you can claim a deduction for these. The cost can be claimed outright if under $300 or depreciated over time if over that amount.

3. Other Expenses:

  • Any direct expenses incurred because of working from home can also be claimed, including stationery, printer ink, and software subscriptions when using the actual cost method.

ATO Guidelines

To ensure compliance with ATO rules, here are some key points to keep in mind:

  • Work-Related Use: Only expenses related to your work can be claimed. You must demonstrate that the expense was incurred as part of your work duties.

  • Record Keeping: It's crucial to keep accurate records. This includes receipts, invoices, and a log of the hours you work from home. The ATO recommends using a diary to record your working hours, especially if you use the fixed-rate method.

  • No Double Dipping: If your employer reimburses you for certain expenses, you cannot claim these on your tax return. Always report the net expenses after any reimbursements.

  • Apportioning Expenses: If you use part of your home for work, you must apportion your expenses accordingly. For instance, if your home office is one room in a five-room house, you can only claim one-fifth of the related expenses.

 

Staying Informed

The ATO updates its guidelines regularly, so it’s essential to stay informed about any changes that may affect your deductions. Visit the ATO website for the latest information and resources tailored for remote workers.

Working from home offers flexibility and convenience, but it also comes with the responsibility of understanding your tax obligations. By familiarising yourself with ATO rules and keeping detailed records, you can ensure that you maximise your deductions while remaining compliant. If in doubt, please contact our office to speak with one of our accountants.

Jenni Anderson