Thanks to greater flexibility with remote access and more businesses becoming cloud based, working from home has become a very common occurrence. Whether it’s checking emails while watching TV or working remotely, if you work from home you may be able to claim this in your individual tax return each year.
However, a recent crackdown on tax deduction claims from the Australian Taxation Office (ATO) means that you will need to justify the amounts that you’re claiming if you get audited.
With a record high $7.9 billion in deductions for other work-related expenses being claimed in the last financial year, according to an article published by Knowledge Shop, the ATO is hesitant to believe that all 6.7 million taxpayer claims are legitimate.
So, What Can You Claim?
As always, this answer depends on your circumstances and how you use the space that you’re working in. For example, if you have an office set up which is used solely for working purposes, you will be able to claim more expenses than if you’re working from your kitchen desk. Remember that regardless of what you claim, if you get audited, you will need to prove to the ATO where you got the figures that you claimed from.
Working From Home Without a Dedicated Work Area
Checking emails from the couch on your phone or finishing that late-night report from bed on your laptop? If you’re putting in a few extra hours and working without a dedicated work area, you can claim the work-related portion of your phone and internet expenses and the decline in value of work tools which are over the value of $300.00 (such as your computer or laptop). This is assuming that you’re not already being reimbursed by your employer for these and that you purchased your work tools yourself.
As mentioned above, if you are audited by the ATO, you will need to justify why you claimed the amount that you have nominated in the work-related expenses section of your return. For example, with your phone and internet use, and assuming that your work load remains consistent throughout the year, you can record and track the amount of work to private use over a 4-week period in the form of a log book or diary, then work out the work percentage to claim from the overall bill costs.
Alternatively, you can also claim up to $50.00 for phone and internet expenses without substantiating the claim. However, the ATO may still request you to prove that the expense was incurred.
Working From Home With a Dedicated Work Area
If you have a space set up solely for work (maybe you work from home a few days a week) then you’re entitled to claim a few more expenses to maintain that work area. Aside from the phone, internet and decline in value of work expenses outlined above, you can also claim running expenses.
With a dedicated work area, you can claim the work portion of the essential items to keep the work area running. These items include utilities, such as electricity and lighting, cleaning and office equipment. There are two ways to calculate this claim:
Option 1: Fixed Rate
This option allows you to claim a fixed rate of 45c per hour, with total hours needing to be tracked in the form of a logbook or diary over a 4 week period which can then be applied to your expenses across the year. Note: if you are using this method to calculate your running expenses, you may not be able to claim the decline in value for work tools over the value of $300.00.
Option 2: Actual Expense
This option requires you to document the total expenses for the essential items that you wish to claim on and work out the floor area of your total home, plus percentage of the year that you used the space exclusively for work purposes. However, this method does allow you to claim the decline in value for your work tools.
ATO Red Flags
Unless you run your business from home (stay tuned for next week’s blog for more information) or have a work phone that isn’t reimbursed by your employer, claiming 100% of your phone and internet expenses is sure to catch the ATO’s eye… and not in a good way. Be realistic with what you’re claiming and remember that you will need to produce figures if you’re audited, so it’s important to keep a record of your time and expenses to back up your claims.
To find out more about working from home claims, contact our office on 07 3367 3155 to organise a meeting with one of our tax professionals.