How to claim your home office costs

Many more people are working from home in response to COVID-19, even the owners of some businesses. Not everyone is used to being able to claim their home office expenses, and some allowances have been changed by the ATO to make it more simple to claim. There are three methods for claiming home office costs and we’ve explained these below.

Shortcut Method

This method is available for the period 1st March to 30th September 2020. Using this method you can claim 80 cents per hour for each hour you work from home.

If you use this method you cannot claim any other expenses for working from home.

Fixed Rate Method

You can claim a deduction of 52 cents for each hour you work from home for the work-related expenses you incur for additional running expenses. The fixed-rate covers all expenses you incur for:

the decline in value of home office furniture and furnishings – for example, a desk.
electricity and gas for heating, cooling and lighting.
the cost of repairs to your home office equipment, furniture, and furnishings.

To claim using this method, you must keep records of either:

your actual hours spent working at home for the year.
a diary for a representative four-week period to show your usual pattern of working at home.

You can apply the four-week representative period across the remainder of the year to determine your full deduction amount. However, if your work pattern changes you will need to create a new record.

To use this method, you need to have a dedicated work area, such as a home office when you work from home.

This method doesn’t include the following, so you will need to separately calculate your work-related use for:

phone expenses
Internet expenses
computer consumables and stationery – such as ink
decline in value of equipment – such as phones, computers and laptops.

Actual Cost Method

Under the actual expenses method, you can claim the additional running costs you directly incur as a result of working from home. This may include the following expenses:

electricity and gas for cooling heating and lighting
the decline in value of home office furniture (desk, chair) and furnishings
the decline in value of phones, computers, laptops or similar devices
phone expenses
cleaning (if you use a dedicated area for working)
computer consumables and stationery – such as ink

If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. For example, if the area you use for work is a common area of the home such as a lounge room and that area is being used by other members of your household for another purpose (such as, family members watching television) at the same time you’re working, you won’t be incurring any additional costs for lighting, heating or cooling as a result of working in that room.

To calculate the work-related portion of your actual expenses you must have records. You can:

keep a record of the number of actual hours you work from home during the income year
keep a diary for a representative four- week period to show your usual pattern of working from home
work out the decline in value of depreciating assets and
- keep receipts showing the amount you spent on the assets
- show the percentage of the year you used those depreciating assets exclusively – for work – you can claim for the portion of the decline in value that reflects your work-related use of the depreciating assets
work out the cost of your cleaning expenses (if you have a dedicated work area) – for example, a room set up as a home office, by adding together your receipts and multiplying it by the floor area of your dedicated work area (floor area of the dedicated work area divided by the whole area of the house as a percentage) – your claim should be apportioned for any private use of your home
- use of the home office by other family members
work out the cost of your heating, cooling, and lighting by working out the following
- the cost per unit of power used – refer to your utility bill for this information
- the average units used per hour – this is the power consumption per kilowatt-hour for each appliance, equipment or light used
- the total annual hours used for work-related purposes – refer to your record of hours worked or your diary for this information
work out the cost of your phone or internet plan expenses – where you receive an itemised bill, you need to determine your percentage of work use over a four–week representative period.
work out the cost of computer consumables and stationery by keeping receipts for items purchased.