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 employees are eligible to 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 this end of financial year. Here’s what you can, and can’t, claim on your tax return.
Australian Taxation Office assistant commissioner Tim Loh says to claim working-from-home expenses you must be fulfilling your employment duties, not just occasionally checking emails or taking calls.
The additional expenses must be directly related to earning your income because you’re working from home.
And you need to keep a record of your receipts.
Can you claim 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’re using for work. It also includes your internet and phone bill (if you use your phone for work purposes), and cleaning costs for your dedicated work space.
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 and 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 if you decided to permanently work from home rather than go into the office, you’re ineligible.
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 your 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’re able to claim a deduction but you have to include this as income in your tax return.
And if you have children learning remotely, you can’t claim costs you spent on their education – such as iPads, desks or online learning subscriptions.
You can’t claim tracksuit pants or Ugg boots or pyjamas. Only two people can claim them: B1 and B2
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 or Ugg boots or pyjamas,” 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 itemise certain deduction such as telephone costs and internet expenses.
The second is the actual cost method, which covers the actual 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 temporary 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 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 the ATO’s home office expenses calculator for help.