Claiming home office expenses
What you can claim
Running expenses
If you perform some of your work from your home office, you may be able to claim a deduction for the costs you incur in running your home office, even if the room is not set aside solely for work-related purposes. You may be able to claim:
- the decline in value (depreciation) of home office equipment such as computers and telecommunications equipment - if your equipment costs less than $300, you can claim a full deduction for the work-related portion
- work-related phone calls, including from mobiles
- work-related phone rental if you can show that either of the following apply:
- you are on call
- you have to phone your employer, clients or students regularly while you are away from your workplace - for example, you call parents of your students to discuss behavioural issues
- work-related internet access charges
- the cost of heating, cooling and lighting your home office that is over the amount you would ordinarily have to pay if you did not work from home
- the costs of repairs to your home office furniture and fittings.
Example 9 - computer used for private and personal use
Rita uses her computer and personal internet account at home to access her work emails to grade her year 12 students' English assignments. Rita uses her computer and the internet:
- 40% for work purposes
- 60% for private purposes.
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A depreciating asset, such as a computer, is an asset that has a limited effective life and can reasonably be expected to decline in value over the time you use it.
If you purchase an item that cost more than $300, you can only claim a deduction for its decline in value.
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What you cannot claim
Occupancy expenses
Occupancy expenses include rent or mortgage interest, council rates and house insurance premiums. You can only claim occupancy expenses where your home office is considered to be a place of business. If your only income is paid to you as an employee, you are generally not able to claim a deduction for your occupancy expenses.
Keeping records of your home office running expenses
The records you must keep may include:
- receipts or other written evidence of your expenses, including receipts for depreciating assets you have purchased - for example, your computer
- diary entries you make to record your small expenses ($10 or less) totalling no more than $200, or expenses you cannot obtain any kind of evidence for, regardless of the amount - for example, stationery
- itemised phone accounts you can identify work-related calls on - see example 12. If you don't receive itemised accounts, you can make a reasonable estimate of your call costs based on diary records you have kept over a four-week period, together with your relevant telephone accounts.
Working out your claim
To claim a deduction for the electricity and gas you use and the decline in value of your office furniture, you can claim either of the following:
- a deduction for your actual expenses
- a deduction you work out at a rate of 34 cents per hour.
To use the 34 cents per hour method of claiming, keep a diary to record the amount of time you use your home office for work purposes. The diary must show a representative period of at least four weeks to establish a pattern of use for the whole year.
Example 10 - 34 cents per hour method
Rita uses a diary to record the time she uses her home office for work purposes. Based on her diary entries, Rita works out she spends an average of three hours each week night working in her home office. Rita works for 38 weeks each year.
Rita chooses to use the fixed rate of 34 cents per hour to work out the amount she can claim for her home office expenses.
Rita calculates her home office running expense deduction as follows:
Rita works out the depreciation of her computer separately.
Example 11 - calculating depreciation of a computer
Rita purchased her computer on 5 September for $3,000 and has worked out that she uses it 40% for work purposes. Rita looks up the effective life of depreciating assets on our website, which says the effective life of a computer is four years. Rita uses the prime cost method to work out the decline in value of her computer:
Asset's cost
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X
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Days held
365
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X
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100%
effective life
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X
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work use percentage
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$3,000
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X
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299 (5 Sep - 30 June)
365
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X
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100%
4 years
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X
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40%
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So, Rita claims $246 for the depreciation of her computer in the first year.
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If you receive a laptop at no cost through a government initiative, you cannot claim a deduction for the cost of the laptop as you have not incurred the expense.
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Example 12 - calculating phone expenses
Rita uses her mobile phone for work purposes. She is on a set mobile phone plan of $49 a month and rarely exceeds the plan cap.
Rita receives an itemised account from her phone provider each month by email, which includes details of the individual calls she has made.
At least once a year, and sometimes two or three times, Rita prints out her account and highlights the work-related calls she has made. She makes notes on her account for the first month about who she is calling for work - her employer, parents and so on.
She works out that 15% of the individual call expenses are for work and applies that to her cap amount of $49 a month. The other two months Rita reviews are consistent with this.
Since Rita was only at work for 38 weeks of the year, she calculates her work-related mobile phone expense deduction as follows:
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You claim your home office expenses at D5 Other work-related expenses on your income tax return.
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Last Modified: Thursday, 30 June 2011