Tax deductions

How to claim work-from-home tax deductions on your tax return

If you’re still working from home (and will continue to do so), it might be a good idea to understand exactly what you can and can’t claim at tax time, because otherwise you risk being rude. the shock comes July 1 when your supposed deductions are just pipe dreams.

An employee who works from home (i.e. you) may be able to claim deductions for expenses you incur that are related to your job. But that doesn’t mean a daily coffee delivered by Uber Eats or an oodie (although that’s your “work” outfit) can be claimed.

The Australian Taxation Office (ATO) has a guide on this for those of you who need it, but we’ve condensed it here, starting with the working from home tax deductions you can complaint.

Work from home tax deductions you can claim

ATO Assistant Commissioner Tim Loh told Gizmodo Australia that to claim a deduction for a work-related expense, you must follow the three golden rules:

  • You had to spend the money yourself and were not reimbursed.
  • Expenses should be directly related to earning your income and not be private in nature.
  • You must have a record to prove this (a receipt is preferred).

Let’s break this down. First of all, to claim your work-from-home expenses at tax time 2022 (starting July 1, btw), you must be working from home to perform your job duties, not just perform minimal tasks, such as consulting occasionally email or take calls.

Second, these expenses must be additional expenses incurred due to working from home. This means that the usual expenses you had before working from home are not considered tax deductions for working from home.

You can also claim a deduction for additional running costs you incur as a result of wfh – these include:

  • electricity expenses for heating or cooling and lighting
  • the decline in value of office furniture and furnishings as well as other items used for work – for example, a laptop
  • internet spending
  • telephone charges
  • home office equipment, including computers, printers, telephones, furniture and furnishings – you can claim either the full cost of the items up to $300 or the decline in value (depreciation) for items over $300.

In limited circumstances, you may also be entitled to claim occupancy costs as part of your tax deduction. However, it is best to check with the Australian Taxation Office or your accountant.

What you can’t claim

As we mentioned above, you can’t claim a work from home tax deduction on cafes. This also extends to tea, milk and other general household items, although your employer may provide them at work. Also, if your employer provided you with a laptop or phone, it’s not yours to claim, nor the expenses you buy, your employer reimburses you.

If your employer pays you an allowance to cover your expenses, you can claim a deduction for those expenses. However, you must include the allowance as income on your tax return.

You also cannot claim expenses related to your children’s education, such as iPads and desks or e-learning subscriptions. As an employee working from home, you generally cannot claim occupancy costs either.

How to calculate your wfh tax deductions

You must keep records for five years (in most cases) from the date you file your tax return. Records may include tax returns, payment summaries, and receipts. You will receive important documents for doing your tax during the income year.

Tracking your work-from-home expenses can be tricky, which is why the ATO has introduced a shortcut method. It’s a simple way to calculate these expenses with minimal record-keeping requirements. The temporary shortcut mode initially applied from March 1 to June 30, 2020, but can now be applied until June 30, 2022. The shortcut mode is an all-inclusive rate of 80 cents per hour worked from home. Loh said that if you use this method, you cannot separately claim other costs associated with working from home, such as the decline in value of new furniture or a laptop computer, the work-related portion of your telephone and internet or cleaning costs, as these are included in the 80 cents.

There is also the fixed rate method which is an amount per hour of work for additional operating expenses plus expenses not covered by the package. The 52 cents per hour flat rate method requires dedicated home office space. It covers heating, air conditioning, lighting and cleaning costs. You will need to separately calculate the work-related portion of your phone and internet expenses, computer consumables, stationery, and the decline in value of a computer, laptop, or similar device and the decline in value of office furniture.

And the current price method, which is the real expenses you incur as a result of working from home. Loh said it’s important to keep records for everything here.

Whatever method you use to claim work from home, you need to have documents to prove it,” he said. “We urge people to read the guidance on our website to ensure they understand their record keeping obligations.”

You can use the myDeductions tool in the ATO app to track your expenses and income throughout the year, to make it easier for you at tax time.

“It’s a quick and easy way to capture information on the go by taking and uploading photos of receipts,” Loh added.

Expenses related to working from home should be reported in the “other work-related expenses” section of your tax return. If you are using the temporary shortcut method, enter in the description “COVID-19 hourly rate”.

How to report work-related phone calls on your tax return

You can claim a portion of your phone bill reflecting work-related line usage if you can prove that you are on call or if you need to make regular phone calls to your staff, employer, clients or clients when you are absent from your place of work. If your employer provides you with a phone for work and it is billed for usage (phone calls, texts and data), then you can’t claim a deduction. Likewise, if you pay for your use and your employer then reimburses you, you cannot claim a deduction at tax time.

If you use your phone to look for a job, you can’t claim a deduction, as you are not yet generating income from phone use.

If your phone, data, and internet use for work is incidental and you’re not claiming more than $50 in total, you don’t need to keep records.

To claim a deduction over $50, you must keep records to show your work-related use. Your records should show a representative period of four weeks for each year of income. You can then apply this representative period to the entire income year.

The records you keep may include journal entries, including electronic records and invoices. Proof that your employer expects you to work from home or make work-related calls from home will also help demonstrate your right to claim a deduction on your tax return.

Rules for Claiming Laptops on Tax

If you are employed and must work from home and have recently purchased a laptop computer, you may be able to claim the value of your computer as capital cost allowance year over year. Saying that, you actually have to use the laptop for work. If you use the laptop for both jobs and for private purposes, you can only claim a percentage based on the work-related part of the use. If you paid for your computer, but your employer reimbursed you, you are not entitled to a deduction for that computer.

If your laptop cost less than $300, you can claim an immediate deduction for the full cost of the item. If the wfh laptop was worth more than $300, at tax time, you can claim depreciation over the life of the equipment as a deduction on your return. For laptops, this is usually two years and for desktops, usually four years.

How to file your tax return

You can file online using myTax, through a registered tax agent, or complete a paper tax return. Your tax return covers the tax year from July 1 to June 30. Tax time is July 1, 2022. If you need to file a tax return, you must file it or go to a tax official by October 31, 2022.