With the rise of flexible work arrangements and remote working becoming more common, many employees find themselves working from home. The Australian Taxation Office (ATO) provides clear guidelines on how work-from-home employees can manage their tax affairs, including what expenses can be claimed and how to keep proper records. This detailed guide covers everything you need to know to stay compliant and maximise your eligible deductions while working from home.
Who Is Considered a Work-From-Home Employee?
A work-from-home employee is someone who performs their job duties from their residence, either on a full-time or part-time basis, rather than at their employer’s premises. This arrangement may be permanent or temporary, such as during periods of illness, parental leave, or government directives like those during the COVID-19 pandemic.
Claimable Work-From-Home Expenses
The ATO allows employees to claim deductions for certain expenses incurred while working from home, provided the expenses relate directly to earning your income and you have a suitable method to calculate your claim. Common deductible expenses include:
- Home office running expenses: Electricity and gas for heating, cooling, and lighting your workspace.
- Phone and internet expenses: Work-related portion of your bills.
- Depreciation of home office equipment: Such as computers, printers, desks, chairs, and office furniture.
- Stationery and office supplies: Pens, paper, printer ink, and similar items.
- Cleaning expenses: A portion of cleaning costs for your home office.
Note that expenses for general household items, mortgage or rent, and food and drink are generally not deductible.
Methods to Calculate Your Deduction
The ATO provides several methods to calculate your work-from-home expense deductions:
1. Fixed Rate Method
You can claim a set rate (currently 67 cents per hour) for each hour you work from home. This rate covers all running expenses like electricity, gas, cleaning, and decline in value of home office furniture. You can still claim separate phone, internet, and computer expenses if you have records.
2. Actual Cost Method
This method requires you to keep detailed records of all expenses and claim the work-related portion. You need to calculate the percentage of home used for work and the hours worked. This method may yield larger deductions but requires thorough record keeping.
3. Shortcut Method
Introduced during the COVID-19 pandemic, this method allows you to claim 80 cents per hour for all running expenses without needing detailed records. It is available for eligible periods as defined by the ATO.
Record Keeping Requirements
To claim work-from-home expenses, you must keep evidence to support your claims. Required records include:
- Timesheets or diaries recording hours worked from home
- Receipts and bills for expenses such as electricity, internet, and office equipment
- Records showing how you calculated the work-related portion of expenses
- Written evidence of your employer’s requirement to work from home (if applicable)
Keeping detailed records for at least five years is essential in case of an ATO review or audit.
Employer-Provided Equipment
If your employer provides equipment such as a laptop or phone, you generally cannot claim depreciation on these items as you do not own them. However, if you incur additional expenses related to using that equipment (such as electricity or internet costs), you may be able to claim those expenses.
Superannuation and Work-From-Home Employees
Your employer is still required to pay superannuation contributions based on your ordinary earnings, regardless of whether you work from home or on-site.
Common Mistakes to Avoid
- Claiming private expenses or full household bills without apportioning work-related use
- Failing to keep sufficient records to substantiate claims
- Claiming mortgage interest or rent for your home
- Claiming for periods when you were not working (e.g., holidays or sick leave)
How to Claim Your Work-From-Home Expenses
When preparing your tax return, you report your work-from-home expenses in the “Deductions” section under work-related expenses. Use the method you have chosen to calculate your claim and ensure you have records to support it.
Using the ATO’s online tools and calculators can help estimate your deductions accurately.
Conclusion
The ATO’s guidelines provide clear frameworks for work-from-home employees to claim legitimate expenses while maintaining compliance. By understanding which expenses are deductible, choosing the right calculation method, and keeping thorough records, you can maximise your tax deductions and reduce your taxable income. Always keep documentation and seek advice if your situation is complex or unclear.
Working from home offers flexibility and convenience, and with proper tax management, it can also provide financial benefits during tax time.
