Had another year of working from home? If yes, then you and 40% of Australians now work from home on a regular basis. Many people have purpose-made work spaces at home off the back of their COVID experiences and changing work cultures. Some have even bought new houses to accommodate their WFH needs. Here’s a breakdown of what you can claim back on tax at the end of the financial year.

What constitutes WFH in the eyes of the ATO?

To claim a tax deduction on costs associated with working from home, you must be working from home to fulfil your employment duties, not just carrying out minimal tasks, such as occasionally checking emails or taking calls. If you are working from home, you must be able to prove you have incurred additional expenses as a result of working from home. This isn’t a difficult process.

What can you claim?

You can claim a deduction on household running expenses which relate to the use of facilities within your home. These include electricity expenses for heating or cooling and lighting; the decline in value of office furniture and furnishings as well other items used for work – for example, a laptop; internet and phone expenses.

Expenses you can’t claim:

You can’t claim incidentals such as food and drink; costs that relate to your children’s education; items your employer provides or any items where your employer pays for or reimburses you for the expense.

How to claim:

You need to choose one of three methods:

1. Fixed method – You can claim the fixed rate of 52 cents for each hour you worked from home. It helps to have a spreadsheet or hour log. This will cover the decline in value of home office furniture and furnishings; electricity and gas for heating, cooling and lighting; cleaning your home office. This doesn’t include your phone and internet, or depreciating assets such as your computer.
2. Actual cost method requires you to work out your deduction by calculating the actual expenses you incur to produce your income when working from home. This may include decline in value of depreciating assets (such as your computer); cleaning expenses for a dedicated work area; heating, cooling and lighting, consumables such as stationery; phone and internet.
3. The shortcut method is valid for the Financial Year 21/22, and ends on 30 June 2022. Using this method, you can claim 80 cents per hour for each hour you work from home. You can’t claim any other expenses for working from home, even if you bought new equipment. You can use this method if you worked from home and incurred some additional running expenses as a result and have a record of the number of hours you worked from home.

The ATO is in full collection mode as it aims to recover financial losses during the COVID period. It is absolutely critical that you have a record of everything you claim. A shoebox is rarely adequate and there are many efficient ways to keep a record of your expenses through the year. Talk to us for some ideas that would suit you.

Audits are on the rise too. We recommend audit insurance. For a nominal fee, you can insure against the professional fees (accountants and lawyers) associated with responding to an audit on your behalf. If you would like to talk about protecting yourself with audit insurance, please talk to us for a referral: [email protected]