In a post-pandemic landscape, over 2 million Australians work from home (WFH) at least once weekly. Although this work environment offers greater flexibility and improves individuals’ work-life balance, workers incur the additional electricity, internet, and home office equipment costs.
So, how do you calculate these deductions?
Keep reading for further details of the WFH deduction method that works best for you.
Which Work-From-Home Deductions Apply?
The ATO permits deductions for the following costs:
- Mobile data and internet charges
- Electricity and gas bills
- Stationary and computer consumables (like ink and paper)
- Mobile and landline costs
- Cleaning in dedicated offices only
Depreciating assets, like computers and specialist equipment, are deductible, too. You’d claim the declining value over time.
You could receive an immediate deduction if an asset costs $300 or less. The ATO also includes maintenance and repair fees.
For depreciating assets, you’d need the receipt, a usage log, the date you first used it for work, and an outline declaring how you intend to utilise it.
Consider the Fixed Rate Method
The fixed rate method enables you to claim selected WFH expenses hourly. As of 2023, the fixed rate method increased to 67 cents per hour–a rise from 52 cents between the 2018–2019 and 2021–2022 fiscal years.
You don’t need a dedicated workspace to use the fixed rate method, so it’s a great option for people living in flats and bungalows.
The ATO needs evidence of your work patterns, so use timesheets to record your hours from home. Use a logbook to track work-related telephone usage and electricity and gas bills to show you’re not deducting bills for personal use.
Use the Actual Cost Method
The actual cost method enables you to get a more accurate deduction on expenses made for bills and equipment. While this is a useful way to maximise your tax savings, it does incur more detailed record keeping.
As of 2023, you don’t need a dedicated workspace but can’t deduct indirect expenses. For instance, you couldn’t claim lighting or heating expenses while working in the living room where another tenant was using those utilities.
Records needed for the actual cost method include receipts and invoices and specific details like the amount paid, the date, and the supplier. You’d also need to calculate the percentage of each bill dedicated to work.
Which Costs Aren’t Deductible?
You can’t deduct the following expenses:
- Personal use of utilities, such as electricity, phone interaction, or computer use
- Refreshments like tea, coffee, or groceries
- Other tenants’ use of accepted items
If you use the fixed rate method, you cannot claim another separate deduction.
Maximise Your Tax Savings with Glance Consultants
Speak to a member of our friendly team if you need advice in determining which method is best for you and your unique working habits.
We can help you prepare your tax returns with accurate deductible expenses and in the process assisting you in maximizing your tax refund. Contact us to get started.
