Working from home: what can I deduct?

Have you been directed by your company to work from home to limit the spread of the coronavirus? If so, you may be able to claim a deduction for the additional running costs you incur. The costs you could claim include work-related portion of any heating, cooling, lighting for the area you’re working from, work-related phone and internet, and work-related decline in value of a computer and associated office equipment. To claim these expenses, you must keep specific records ranging from diary entries to receipts.

With the majority of Australia now under lockdown to slow the COVID-19 pandemic, many employers are either encouraging their employees to work from home or have now instituted mandatory work from home policies. While working from home has its benefits, there may be extra expenses too, ranging from printing costs, the need for more internet data and perhaps even additional equipment.

Depending on your circumstances, you may be able to claim a deduction for the additional running costs you incur, including expenses associated with heating, cooling and lighting in the area you are working from, work-related phone and internet, decline in value of a computer (work-related portion only), and decline in value of office equipment. 

If you have a work issued computer or laptop, you cannot claim any decline in value for the computer, this also applies to any work issued office equipment such as additional screens, a keyboard or a mouse. However, if you have purchased your own equipment such as a telephone, a printer or a computer chair, you can claim the full cost of items up to $300 or decline in value (depreciation) for items over $300. This is provided the purchased equipment is used purely for work purposes.

The depreciation that can be claimed depends on the effective life of the asset purchased. For example, the effective life of a laptop is currently 2 years, so if you purchased a laptop for $800 this financial year and it is wholly used for work purposes, you can claim $400 as depreciation in this financial year, and $400 in the next financial year. Although, if the laptop (or other work-related equipment) is used both for work and personal purposes, you can only claim a deduction for the work-related portion of the expense. Work-related portion of other running expenses including computer consumables such a printer paper, ink and various stationery can generally be deducted outright.

To work out your expenses for heating, cooling, lighting, cleaning and the decline in value of furniture, you can use one of two methods, the fixed rate method or the actual value method. Under the fixed rate method, you keep records of your actual hours spent working at home for the year or keep a diary for a representative 4-week period to show your usual pattern of working from home. You can then claim a deduction at a rate of 52c for each hour that your work from home. The actual value method is self-explanatory; however, it not only requires the keeping of a diary, you’ll also need receipts to show the actual amount spent and will be required to work out the cost based on floor area as well as other factors.

For phone and internet expenses, you can claim up to $50 without having to analyse your bills in detail. The rates you can use to work out the cost of your work calls are 25c for calls made from your landline, 75c for calls made from your mobile or 10c for text messages sent from your mobile. If you would like to claim more than $50, you will need to work out the percentage of work use over a 4-week period using a reasonable basis (ie the number of work calls made as a percentage of total calls).

Want to claim?

If you’re working from home and want to claim the additional costs in this year’s tax return, you will need to start keeping records of your expenses. For example, you will need to keep a diary over a 4-week period to work out how much you used your equipment, save all your receipts for depreciating assets you have purchased, and keep diary entries of your small expenses and work-related calls (if you don’t get itemised bills). If you’re not sure where to start, we can help, call us today.

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