Working from a home office has become increasingly common in recent years, and with that comes the opportunity to claim a working from home tax deduction! The introduction of the new fixed-rate method aims to make it easier for people to calculate home office tax deductions in their next tax return.
If you are an Australian resident that works from home, then read on as this blog contains some big tax savings! We’ve also included a working from home tax calculator to make it easy to work out your working from home deduction. We will look at the two different methods of recording working from home expenses, who is eligible to claim the expenses, what you can and can’t claim as a tax deduction for home office expenses, and how you can claim home office tax deductions.
Also included is the working from home rate which can into effect from 1 July 2022. Read on to learn more about tax deductions working from home.
Eligibility
To be eligible to claim the 2024 working from home tax deductions, you must meet the following criteria:
- You must be an Australian resident for tax purposes.
- You must be working from home for your employer.
- Keeps records of the time you work at home.
- Be able to substantiate your costs.
Working from home rate: Fixed Rate Method
The ATO introduced a new working from home rate called the fixed method for claiming expenses in 2023. Under this method, you can now claim 67 cents per hour for every hour you work from home. The working from home rate, (fixed-rate method) makes it simple for people working at home to calculate their tax deductions. This is a new rate from 1 July 2022.
Your working from home tax deduction can then be simple worked out based on the hours worked multiplied by the fixed rate of 67c / hour.
For example, 400 hours worked at home equals a working from home tax deduction of $268 (500 hours x $0.67).
In order to claim the fixed rate method for a home office tax deduction you need to keep records of hours worked at home office. Alternatively, you can use a 4-week diary that shows your regular work pattern up to 28 Feb 2023, then diary entries thereafter.
You will also need to provide evidence that you did pay for the expenses covered by the fixed rate (such as phone or power) and any equipment you bought to work from home like furniture or technology should you be audited.
Actual cost method for home office deductions
The actual cost method involves keeping a record of all receipts from your home office expenses that you have incurred over the financial year to work out your tax deduction working from home. The actual cost method takes into consideration the proportion of time items are used for work (example internet and electricity). Home office tax deductions are then calculated based on the expenses incurred from the items that were used for work.
Records to keep;
- All bills, receipts, and documents to be used for your deductions.
- Evidence of your work-related use of the items or services purchased.
Records to keep when claiming depreciation of an asset
The following records are required when claiming the depreciation of an asset claimed as a home office tax deduction and are applicable to the fixed rate method and the actual cost method:
- When and where you bought the item
- When you started using the item for work purposes
- How you worked out the percentage of work used for the items
- How you worked out the effective life of the item
- Which method was used to calculate the decline in value
What expenses can you claim in the Actual Cost method?
If you are new to working from home, you may have wondered “What home office expenses are tax deductible”. Some examples of the expenses you can claim on your home office tax deduction include:
- Electricity
- Gas
- Water
- Internet
- Phone
- Equipment
- Stationery
What expenses can’t you claim?
What can you not claim as a home office tax deduction?
- Anything personal in nature (like rent, mortgage, coffee)
- Items that are reimbursed by your employer
- Items used for your child’s education (desk, learning subscription, iPad)
- Already claimed as a deduction for another purpose
Tips for 2024 Working from home
The ATO have flagged working from home tax deductions as a focus area for 2024. The tax office have been very direct in their assessment of this deduction and have stressed the importance of keeping a diary, calendar or spreadsheet for the time you have worked from home.
ATO assistant Rob Thomson also went on to advise:
“Copying and pasting your working from home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.”
How to claim working from home tax deductions
To claim tax deduction working from home, you must complete your tax return and include a statement of your expenses. You can claim your working from home expenses when you complete your One Click Life tax return.
Use the working from home tax deduction calculator so you know what your deductible amount is, then enter this into your online tax return.
The introduction of the working from home tax deduction fixed rate method makes it easier for people to claim home office tax deductions. If you are an Australian taxpayer working from home, you can claim portions of expenses such as utility bills, internet, and phone, but you cannot claim personal items or items that your employer has reimbursed you for.
One Click Life can help you get the most out of your online tax return. Feel free to contact us for a free appointment to talk working from home tax deductions.
Get the most out of your working from home tax deduction!
One Click Life makes it simple to organise and track all your life’s admin in one place. One Click Life can help you get the most out of your tax deduction for home office expenses.
Dealing with an online tax agent is an easy way to complete your tax return. Your online tax return and online tax agent fees are tax deductible, so why wouldn’t you use one? One Click Life does more than tax! One Click Life can assist you with your Mortgage, Will, and Private Health Insurance, so you can focus on the things that are important to you.