Do you have a remote job that allows you to work from home? If so, you may be able to take advantage of ATO tax breaks that regular office workers don’t get.
It used to be considerably simpler to deduct home office expenditures before the Tax Act of 2017.
We will assist you to figure out whether you qualify for any of these exemptions. We’ve detailed home office expenses and tax advice below.
Home-based business owners vs. employees working from home
Working from home as an employee is different from operating a company out of your house. If you are an employee working from home, then you are only able to deduct expenditures related to running your home.
Moreover, you may be able to claim occupancy expenses. This includes your power or internet expenses.
The ATO permits you to claim additional expenditures like rent and insurance. For example, if you are using your house as a business location and doing most of your job at home.
You can deduct home office expenses if one of the following three situations applies:
- You have a dedicated workspace, such as a study or spare room, but your home is not your principal business location because you also have an office somewhere else.
- You don’t have a dedicated workspace, such as a dedicated room reserved for work, but you could work at the dining room table for a few full days a week.
- Your home is your primary place of business and you don’t have an office elsewhere. The ATO website includes case studies of successful home-based enterprises.
How much can you deduct for a home office?
Operating costs
If your house meets the requirements as your principal place of business, you could be able to deduct some of the costs associated with running your company from your taxable income.
Keep in mind that these costs are specific to those who run small businesses from their homes. A worker who sometimes does work from home cannot deduct the costs associated with doing so.
Rent, mortgage interest, water and sewer fees, property taxes, and homeowners insurance are all examples of occupancy expenses.
Costs of home office running expenses
If you are working from home, there would be an increase in home facility costs in such instances whether or not you have an office space.
In light of this, the ATO permits taxpayers to deduct the cost of utilities, heating and cooling, business-related phone calls, office lighting, and cleaning supplies for anybody who conducts business from home.
Depreciation of property
The value of different components of your house may decline over time due to normal wear and tear. This is known as property depreciation. While this is an operating cost, not everyone is eligible to take a deduction for a home office.
Rehabilitation of equipment, such as desks, seats, and computers, may be claimed by those who fall into the two categories.
But only those who have a dedicated home office or who do business from their residence may claim the cost of capital works items. These items include carpets, drapes, and light fittings as a tax deduction.
How do you calculate home office deductions expenses?
If you’re an employee with a workstation at an office other than your home and need to deduct some home-related costs, you may do it in one of two ways.
Utilising a fixed-rate method
Depreciation on office furniture like your desk, electricity, and gas, and the cost of repairs to your home office supplies, furniture, and furnishings may all be deducted at a flat rate of 52 cents per hour under this technique, as allowed by the Australian Taxation Office.
Deductions for home office expenditures cannot be claimed using the fixed-rate approach for the following items: consumables like printer ink, stationery, phone, and internet expenses, and the depreciation of home office equipment such as laptops, computers, and telephones.
The use of the actual cost method
If you run a small company out of your house, you should utilise the actual cost approach to determine how much money you spend on home expenses.
Employees that sometimes work from home do not utilise this way of computation. This approach requires you to keep track of your working time from home and your business and leisure-related expenditures.
If you spend 40% of your work week at home, you can deduct that percentage from your income tax. This includes the cost of utilities, internet, cleaning services, phone calls, depreciation, office supplies, and more.
