Over the past few years, the way Australians work has changed significantly. According to the Australian Bureau of Statistics, approximately 37% of people across the country regularly work from home, so it’s more important than ever to understand what this means come tax time.
Whether you work from home in a full-time or hybrid capacity, here’s what you need to know about claiming home office deductions for the 2023-24 financial year.
What are home office deductions?
As a remote worker, home office tax deductions allow you to claim a portion of your at-home expenses related to your work. These deductions can help to reduce your taxable income and ultimately lower your overall tax bill, making it financially beneficial to maintain a dedicated and well-equipped workspace.
Understanding what you can claim
The first step to maximising your home office tax deductions is knowing what you can and can’t claim. Office furniture and equipment such as desks, chairs, stationery, computers, and phones are some of the most common tax deductions for people who work from home. As a general rule, items that cost less than $300 can be written off in full whereas items over $300 will be deducted based on their decline in value or depreciation over time.
People who work from home can also claim the relative cost of utilities and services as a deductible. This can include heating and cooling, internet services, electricity, and even cleaning fees. In some cases, if you have a dedicated home work area, you can even claim the proportionate cost of renting or owning the house.
How to calculate your deductions
The Australian Taxation Office (ATO) offers two options for calculating your home office deductions: the fixed cost method and the actual cost method.
With the actual cost method, you can claim the actual expenses you incur as a result of working from home. To use this method, you must keep detailed records and receipts of all home office-related expenses throughout the financial year, along with a logbook or diary tracking your work hours and the work-related use of these expenses.
Rather than claiming the actual cost of each of your home office expenses, the fixed cost method allows you to claim a set rate of 67 cents for every hour you worked from home during the financial year. This set rate covers most expenses, such as furniture, equipment, and utilities, meaning you can’t claim these as separate deductions.
Common mistakes to avoid when calculating your deductions
To make sure you’re claiming all relevant deductions – and to avoid any issues with the ATO – it’s important to steer clear of a few common tax mistakes.
The first is miscalculating the proportion of your home that is used for work purposes. To avoid this, it’s important to know the size of your workspace and calculate the percentage of your home it represents.
Another common mistake is claiming the full cost of an expense when it is used for both private and work purposes. The ATO specifies that you can only claim the portion of the expense that directly relates to your work. For example, if you use your internet 50% for work and 50% for personal use, you can only claim 50% of the cost as a deduction.
Understanding the ins and outs of your tax entitlements can be tricky, so it’s important to know what you can claim to maximise your deductions this financial year.
Note: This article is general in nature and has been prepared for informational purposes only. It does not take into account individual circumstances and does not constitute financial advice. For personal financial advice, please consult a professional tax adviser.
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