Working from a home office has become the new normal and is a trend that is likely to continue for the months to come. So what can you claim this year to maximise your tax refund?
Home office expenses
If you have been working from home during the past financial year, you may be able to claim a deduction for work-related expenses. You have probably noticed your electricity bill, your internet usage and your phone expenses increasing since working from home. You can claim these running expenses as well as any decline in the value of equipment or furniture.
If your home is your principal place of business, special rules apply for the deductions available and the capital gains tax (CGT) implications for your home. In most cases, if you are working from home as an employee, there will be no CGT implications for your home. However, if you are an employer, it is worthwhile looking into whether you are eligible.
Home office: what can’t you can’t claim?
Employees generally can’t claim occupancy expenses such as rent, mortgage interest, water and rates. There are also some expenses that you can’t claim as an employee.
Employees who work at home can’t claim costs such as coffee tea or milk. Although employers may be able to provide for an office space, general household items cannot be claimed for a home office.
Expenses related to children and their education cannot be claimed. This includes setting them up for online learning, educating them at home or equipment such as computers and desks.
Expenses covered by your employer:
You are unable to claim expenses that you have been reimbursed for or expenses that have been paid for by your employer such as a laptop or computer screen. This also includes the decline in value of items provided by your employer.
Home office calculation methods
There are three key ways that you can calculate home office expenses depending on your circumstances. The methods are the shortcut method, the fixed-rate method and the actual cost method. You must meet the record-keeping requirements and working criteria to use each method.
A shortcut method has been introduced to account for those only working from home between 1 March to 30 September 2020. All employees working from home in this period can use this method by claiming 80 cents per hour for every hour worked from home during this period. With this method, you can claim for phone and internet expenses, the decline in value of equipment, as well as electricity and gas for heating, cooling and lighting.
Using the shortcut method, you are unable to claim any other expenses for working from home. You must also keep a record of the number of hours you have worked from home during the period.
For the fixed-rate method, you can use a fixed rate of 52 cents per hour for each hour that you work from home to allow for home office expenses. This includes the decline in value of home office furniture and furnishings such as desks. It also includes electricity and gas used for heating, cooling and lighting as well as the cost of repairs to your home office equipment and furniture.
You are unable to claim mortgage or interest expenses, rates and taxes as well as depreciation on the home. This method also excludes phone and internet expenses, computer consumables, stationery and the decline in value of equipment so you will need to calculate these separately.
Actual cost method
For the actual cost method, you can claim the additional running costs incurred as a result of working from home. This includes:
- electricity /gas for cooling, heating and lighting
- any decline in value of home office furniture
- the decline in value of phones, computers, laptops or similar devices
- phone expenses
- internet expenses
- cleaning (only if you use a dedicated area for working)
- computer consumables and stationery
If you don’t have a dedicated work area but as with the fixed-rate method, you must keep records of your hours working from home.
APS Tax & Accounting