For a while now, the Australian Taxation Office (ATO) has been concerned about tax deductions individuals have been claiming for a whole host of expenses. The latest on their ‘hit list’ are home office expenses. We guide you through what you can and can’t claim if you work from home.

What home office expenses can be claimed?

  • Running expenses

    If you have a dedicated work area such as a study set aside for work, the essentials to keep the work area running like electricity, cleaning, office equipment etc., can be claimed as an expense.

  • Occupancy expenses

    Expenses such as rent, interest on your home loan, property insurance, land taxes and rates can only be claimed if your home is your ‘place of business’ and no other work location has been provided to you.

    The downside to claiming occupancy expenses such as interest on a mortgage is the impact it has on your tax-free main residence exemption for capital gains tax (CGT) purposes.

    If you are claiming part of your home as a business expense, then it is unlikely that any gain you make on your home will be fully CGT-free. Generally, occupancy expenses are not a deduction available to employees.

  • Decline in value

    For depreciable assets such as computers and printers, you might be able to claim the decline in value if the cost of the item was over $300.

  • Work related phone and internet expenses

    You can claim up to $50 for phone and internet expenses without substantiating the claim (but the ATO still might expect you to prove the claim), or you can work out your actual expenses. Claims for actual expenses can be made by working out the work-related use of the phone and internet and then applying that percentage to the expenses.

A major bugbear for the ATO is that the people who claim 100% of their expenses like mobile phone plans and internet services when they are mostly for personal use. If you claim 100% of your phone and internet and you are not running a business from home, you can expect the ATO to look closely at your claims (that goes for subcontractors as well!).

Expenses

Home is principal workplace with dedicated work area

Home not principal workplace but has dedicated work area

You work at home but no dedicated work area

Running expenses

Yes

Yes

No

Work-related phone & internet expenses

Yes

Yes

Yes

Decline in value of a computer (work related portion)

Yes

Yes Yes

Decline in value of office equipment

Yes

Yes

No

Occupancy expenses

Yes

No

No

Source: Australian Taxation Office