Lockdowns are behind us, but Covid-19 has fundamentally altered Australian workplaces, with more people working from home under flexible arrangements than ever before.
The good news is that employees can claim deductions for the additional expenses incurred at the home office.
Last year, four million Australians claimed working-from-home expenses, and similar numbers are expected at the end of the financial year. Here’s what you can and can’t swear on your tax return.
Who’s eligible?
Australian Taxation Office assistant commissioner Tim Loh says to claim working-from-home expenses; you must fulfill your employment duties, not just occasionally check emails or take calls.
The additional expenses must be directly related to earning your income because you work from home.
And you need to keep a record of your receipts.
Can you claim the bills?
Yes, some. You can claim a deduction for “additional running expenses” incurred because you’re working from home.
That includes your electricity bill for heating, cooling, and lighting your home office and running items you use for work. It also has your internet, phone bill (if you use your phone for work), and cleaning costs for your dedicated workspace.
In some limited circumstances, you may also be able to claim occupancy expenses.
What are occupancy expenses?
Occupancy expenses are expenses you pay to own, rent or use your home, including mortgage interest, rent, council, water rates, land taxes, and house insurance premiums.
Generally, you can’t claim these, but there are some exceptions.
If your employer doesn’t provide an alternative place (an office) to work from, and if the area of your home you use for work is primarily used for work purposes, you may be able to claim occupancy expenses. But you’re ineligible if you decide to work from home rather than go into the office permanently.
If you’re a home trader who operates some or all of your business from home, you can also claim occupancy expenses.
Can you claim furniture and household items?
Yes. You can claim running expenses for the “decline in value” of office furniture and other items used for work, such as your laptop or office chair.
You can also claim stationery, computer consumables such as printing paper and ink, and home office equipment, including laptops, furniture, printers, and phones.
So theoretically, if you decide to go out and buy a luxury pen, you may be able to claim it, according to the key criteria.
“If you’re using it for work-related purposes, if you paid for it, you can claim it,” Loh says. “Part of it is common sense; you need the record to show you’ve used it for work-related purposes.”
Importantly, this year you can also claim Covid tests if they were taken for work-related purposes, such as needing to be in the office.
What can’t you claim?
Firstly, you can’t claim snacks or drinks.
“Just because your employer provides coffee, tea, and Tim Tams doesn’t mean you can incur it,” Loh says.
You also can’t claim items your employer has provided, and you can’t claim anything that was already reimbursed by your workplace.
If your employer pays you an allowance to cover expenses, you can claim a deduction, but you must include this as income in your tax return.
And if you have children learning remotely, you can’t claim the costs you spent on their education – such as iPads, desks, or online learning subscriptions.
You can’t claim tracksuit pants or Ugg boots, or pajamas. Only two people can claim them: B1 and B2Tim Loh.
The important rule is anything you claim has to be used exclusively for work. So you can’t claim toilet paper just because you’re using more of it or log your Zoom call attire.
“You can’t claim tracksuit pants, Ugg boots, or pajamas,” Loh says. “Only two people can claim them: B1 and B2.”
How do you claim work-from-home expenses?
You can use one of three methods to calculate your deduction.
The first is the 52 cents per hour method, which offers 52 cents per working hour and allows you to itemize certain deductions such as telephone and internet expenses.
The second is the actual cost method, which covers the basic expenses you incurred due to working from home.
But you need a record to demonstrate what’s used for work and what’s used privately. This is a lot more complicated to calculate.
“If you’ve got a Netflix account and are using it to watch Stranger Things, you can’t claim the full internet account,” Loh says.
The final method is a quick shortcut method introduced in 2020. It’s the “easiest and simplest” way to calculate your expenses with minimal record keeping.
“All you need to do is work out the number of hours you work from home and multiply that by 80 cents per hour,” Loh says.
So if you work full-time from home, you’ll get around a $1,500 deduction. The shortcut method was due to lapse but has now been extended until 30 June.
You can use ATO’s home office expenses calculator for help.
