Taxes 101: How to Claim Your Home Office

The digital revolution has changed the way Australians work. People are working less from offices, opting instead for flexible work environments. This usually means working from home. And when you’re working from home, it’s important to remember this space can be claimed as a tax deduction.

Doing so can increase the amount you receive from your tax return, giving a boost to your savings account or helping you out with some of your recurring expenses.

Keep the following in mind when claiming your home office on your taxes:

Tools and equipment

Things such as computers, desks, chairs and calculators all count as tools you use to do your work and earn your income. As such, you may be able to claim part of their cost on your return. How much you will be able to claim will depend on how much you use the equipment. For example, if half of the time you use your computer it’s for personal reasons and the other half for work, then you can claim half of the cost of the computer. For items that cost over $300, you will have to claim its decline in value. And you can also claim repairs and insurance costs associate with this equipment.

Running and occupancy expenses

When you work from home, you’re going to incur some ongoing expenses, such as phone, heating and cooling, and electricity bills. Typically, you can claim these as deductions. However, you usually cannot claim occupancy costs such as rents and mortgage payments. But if you are running your business solely from your home, you may be able to claim some of these expenses. The Tax Office will figure this out based on the proportion of your home you use for business purposes.

Make sure to stay organised

If and when you do decide to make a claim, the Tax Office will want some verification that the expenses you declare are indeed related to the work you do from your home office. This is why it’s critical to keep track of all of your receipts throughout the year.

A good habit to get into is to keep all receipts in a separate folder, and also to keep a diary of how often you use your equipment for work during a four-week period. Make sure to also hang onto your phone bills, marking which calls are work related. And hold onto any records of repairs or cleaning done in your home office.

The penalty for not being able to verify the deductions you claim is usually a hefty fine, so make sure you’re keeping track of all the details. It will end up saving you a lot of money in the long run.

Lodging Your Return

It may be a good idea to use the ATO’s Home Office Expenses Calculator before lodging your return. This will give you an idea as to how much you can expect to get back. Then, you can either lodge on your own or through an accountant. But whatever you do, don’t forget about the 31 October deadline!