Working from Home? Supercharge Your Next Return with Ease

With the range of technology and software available today, it’s become easier to connect working from anywhere. Employees can efficiently complete calls using teleconferencing software, many collaboration tools are now cloud-based, and work devices, including laptops and tablets, are light and portable. Working from home has truly revolutionized the way we approach our daily tasks.

If you’ve been working from home, you’ve likely also set up a dedicated work area, and you’re using your own electricity and resources to power your workday. But which of these items can you claim in your next tax return to ensure you maximize your return while working from home?

How Many Australians Work from Home?

Working from home has become more common as companies began providing the technology to enable employees to work from anywhere. Research from Roy Morgan found that in early 2020, at the height of the COVID-19 pandemic shutdown, 32 per cent of Australian workers were working from home. This equates to over 4.3 million people working from home.

It’s easier for employees in certain industries to work from home, such as finance and insurance, public administration and defence, and communications. In contrast, more “hands-on” industries such as retail, manufacturing, transport and storage, and agriculture still require staff to be present in-store.

Tax Deductions Available if You Work from Home

Home office expenses you may be able to claim while working from home include:

• Electricity: The cost of powering your home office, including lighting, heating, and cooling.
• Cleaning Costs: Expenses for cleaning your dedicated work area.
• Phone and Internet Expenses: Costs associated with work-related phone calls and internet usage.
• Computer Consumables: Items such as printer paper and ink cartridges.
• Stationery: Office supplies like pens, paper, and notebooks.
• Home Office Equipment: Including computers, printers, phones, furniture, and furnishings.

The Australian Taxation Office (ATO) provides a complete list of the available deductions and how to calculate each on its website.

How to Calculate Your Home Office Expenses

There are three methods employees can use to calculate their home office expenses while working from home:

1. Shortcut Method: 80 cents per work hour – only available until 30 June 2022. This method covers all expenses, including electricity, internet, and depreciation of equipment.
2. Fixed-Rate Method: 52 cents per work hour. This method covers the cost of electricity, cleaning, and depreciation of office furniture. You can separately claim phone, internet, and computer consumables.
3. Actual Cost Method: This method involves calculating the actual expenses incurred. You need to keep detailed records of all expenses, including receipts and bills.

Be Careful with Home Office Expenses

If you include home office expenses in your next tax return, ensure you calculate and apply your deductions correctly. For example, you can claim the full cost of home office equipment up to $300, but you need to claim the decline in value (depreciation) for any items that cost over $300.

Regardless of the method you use to calculate your expenses while working from home, you will need to have records. You’ll need to keep receipts for any purchases you’ve made and a record of relevant utilities and bills. You’ll also need to keep a timesheet, roster, or diary that shows the hours you’ve been working from home.

If you can, keep your relevant records and receipts aside and updated throughout the year to save yourself a significant administrative workload at tax time.

Have a Professional Prepare Your Tax Return to Maximize Your Refund

With the range of deductions that may be available to you, plus the different calculation methods for home office expenses, having a registered tax professional prepare your tax return can be worth the investment. Quite often, your maximized refund will more than cover the cost of having a professional prepare your return.

If you’re unsure about the home office deductions you’re entitled to while working from home, contact an accountant or qualified financial professional for advice. They can help you navigate the complexities of tax deductions and ensure you claim everything you’re entitled to, maximizing your refund.

Sources:

“Home office expenses” Australian Taxation Office (23 November 2021)
“Working from home during COVID-19” Australian Taxation Office (15 October 2021)
“Nearly a third of Australian workers have been ‘#WFH’” Roy Morgan (29 June 2020)