What you need to know about Deductions if You Work from Home

Not sure how much tax you owe now that you work from home?

Here’s a quick overview of everything you need to know

What deductions can I make if I’m working from home?

There are 2 ways you can claim deductions.

1. Fixed Rate Method (67 cents per hour): This lets you claim 67 cents per hour worked from home. This includes expenses like mobile phone, internet, heating, cooling and lighting. This rate may change from year to year, so check the ATO’s website for updates after the 2024 financial year.

2. Actual Cost Method: This method will give you the most deductions, but it’s also the hardest. You can use the ATO’s home office expenses calculator to see which expenses you can deduct. You will need receipts for all expenses and depreciation you want to claim.

What work-from-home (WFH) tax deduction do I qualify for?

You don’t need to work a minimum number of hours to claim WFH deductions.

But you can only claim deductions if:

1. You’re working from home to fulfil employment duties, and not just doing minimal tasks like checking emails, and
2. You’re facing additional expenses because of working from home, and
3. You have records showing how you incurred these expenses. More details on this are provided below.

What records do I need to keep?

First and most important, you must have records showing how many hours you worked from home (between 1 July to 30 June each year).

You can use a diary, spreadsheet, roster, or timesheet to log clock-in and clock-out times.

Estimates of hours worked are no longer accepted. So, the ATO expects records to be made as soon afterwards as possible.

Under the actual cost method, you must keep records of:

• Utility bills (electricity, heating, cooling)
• Internet and phone usage
• Office furniture and equipment purchases
• Receipts for repairs and maintenance related to your workspace

How do I prove I used my phone for work?

This can be tough because most of us have one phone we use for everything.

First, if you’re using the fixed rate method, phone and data charges are already included. You cannot claim anything more separately.

If you’re using the actual cost method, you need to calculate what percentage of phone and data you used for work.

The ATO doesn’t (usually) expect to see full logs of every call made. They just need to see you’re being “reasonable”.

They suggest keeping a log of work-related phone use for a continuous 4 weeks / 1 month. You can then calculate business use % and multiply that by 12 to calculate a “reasonable deduction” for the full income year.

How do I deduct rent from my taxes?

Eligibility

For Employees

Employees generally cannot deduct any part of their rent, as rent is a “private expense”.

And so is home insurance and mortgage interest.

However, if you have an area or room set up exclusively as a home office, then you can deduct part of the rent.

For Business Owners

Sole traders or small business owners have more flexibility to deduct rent as a business expense.

To qualify, some part of your home must be used exclusively for business. If so, you can deduct a part of your rent, mortgage interest, and depreciation on home office equipment.

How To Claim?

You have to calculate the square footage of your workspace relative to your home’s total area.

Meaning if you have a 100 sq. meter office in a 1,000 sq. meter home, you may deduct 10% of your rent.

You then report the deductible portion of your rent as a business expense on your tax return.

Note that:

• You’ll need to use the actual cost method of tax deduction. That means having evidence of your workspace, and calculations to justify your deduction.
• You can’t use this space for anything else.
• You may face higher capital gains tax (CGT) when later selling your home

How do I file taxes if I work from home?

Too busy for all the tax paperwork? Want to claim deductions but worried about ATO scrutiny?

We can help.

We’ll do your tax returns and filing and find every deduction you deserve. So you have more money to spend, save, and invest.

We can also help you deal with the ATO if you’re facing an audit or scrutiny. Get in touch or call us at (07) 3483 0100 for a free consultation.