Home office expenses can save you tax, but only if you know how to claim everything you're entitled to. Numberspro explains what you can and cannot claim this year.
Do you work entirely from a home office or do you have to work overtime from home?
Many of us have to open our laptops at home to read emails or use our own phones to have a few work calls every now and then. But if it is for you to take work home on a regular basis, it is a good idea to set up a dedicated area to work in. Not only does it help you stay focused, but there is also a bonus; you can claim a tax deduction for your home office costs.
These valuable tax deductions generally cover the costs associated with working from home or running a business from home.
If you worked from home in 2020 or 2021 because of COVID-19, read more about the special deductions for COVID-19 working from home here.
What are the costs of the home office?
Generally, the home office costs are split into two broad types; usage costs of the home office and the costs of using the home office:
The running costs of the home office are declared when you sometimes work from home (also during COVID). If you work permanently from home, you probably use the occupancy cost method.
These are the general operating costs of the home office and include:
the costs of using a room (energy costs for heating, cooling and lighting)
business telephone costs
the depreciation of IT equipment (computer, printer, scanner, etc.)
the depreciation of furniture and furnishings (tables, chairs, curtains / blinds, floor coverings, lighting fixtures, etc.)
the costs of repairing furniture and furnishings used for your work
These items are all claimed separately on your tax return.
You can declare ongoing costs in two ways;
At a rate of 52 cents an hour, or
The amount of actual costs you incurred due to a fixed usage pattern.
You can't claim a business expense deduction if no additional expenses were incurred. For example, if you do your work in the living room of your house where other people watch television. That is why it is important to have your own office or room if you want to declare home office costs.
52 cents an hour
Use this rate to calculate what you can declare as ongoing charges on your tax return. It's a nominal rate (currently 52 cents an hour) set by the ATO to cover all home office costs, rather than billing them separately.
For example, if you work 8 hours from home, calculate your claim by multiplying 52c by the number of weeks worked per year. Let's say this is 48 weeks (52 weeks minus 4 weeks of annual leave):
52 cents x 8 hours x 48 weeks = $ 199.68
That's an additional $ 199.68 to claim on your return!
Numberspro Bonus: The Numberspro tax return does the math for you. Just enter the number of hours you work per week and the number of weeks you worked during the year and we will do the rest!
Visit Also: Tax Agent in Melbourne
Pattern of use
If you want to declare the true cost of working from home, you must keep a record of your usage pattern.
The ATO accepts a diary with the day and time you used your home office for work. Your diary must be kept for at least four weeks in a financial year. You can then divide all your associated expenses to claim some of your power, heating, cooling, cleaning, furniture, etc.
This method generally leads to a greater claim than the cents per hour method, but is more complicated. Chat with your tax agent to see which method is best for you.
In general, accommodation costs are only relevant for those who use their home as a place of business.
Additionally, if your employer doesn't provide you with work space and you can prove that your home is your primary workplace, you can also incur housing costs.
To find out how much you can claim, calculate what percentage of your entire house is occupied by your home office. So if your home office takes up 15% of your home, you can declare 15% of your housing costs.
These housing costs can consist of:
Computer or office equipment
To claim utility charges, you must be able to pass what the ATO calls the 'interest deductibility test'
Simply put, if you plan to claim a deduction from the interest you pay on your mortgage, the area you declare as your home office / place of business should have the 'character' of a business establishment. It must meet the criteria set forth by the ATO:
clearly identifiable as a place of business, for example, you have a sign identifying your business on the front of your home
not readily suitable or adaptable for private or household purposes
used exclusively or almost exclusively for the conduct of your business
used regularly for visits by your customers.
Other costs for working from home
If you are reporting work from home, chances are that you will also qualify for further deductions that may apply to you.
Common other work-from-home deductions include:
Computers, laptops and software - if not supplied by your company
Mobile phone charges
Internet costs at home
Furniture or furnishings in the area you use for work (this is a tricky one, it's best to talk to a tax Agent like Numberspro to claim this deduction!)
Stationery and other consumables for computers, such as: notebook computers, paper, printer ink
For more information visit website www.numberspro.com.au
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