If you operate your business in full or in part from home and are required to use your own computer, phone or other electronic devices for work purposes, you may be able to claim a deduction for your costs. There are however rules you need to adhere to and records you need to keep.
The deductions you may be able to claim are for:
- occupancy expenses such as rent, mortgage interest, rates, land taxes and house insurance premiums
- running expenses which can include:
- home office equipment such as computers, printers and telephones, the cost (for items costing up to $300) or decline in value (for items costing $300 or more)
- work-related phone calls (including mobiles) and phone rental (a portion reflecting the share of work-related use of the line) if you can show you are on call, or have to phone your employer or clients regularly while you are away from your workplace
- heating, cooling and lighting
- the costs of repairs to your home office furniture and fittings, and
- cleaning expenses.
Being able to claim these expenses hinges on whether your home is your place of business and if you have an area set aside exclusively for business activities.
If your home is indeed your place of business and you have an area set aside exclusively for business activities, you may be able to claim both occupancy and running expenses. If you carry on your business elsewhere however and also do some work at home, you cannot claim occupancy expenses – even if you have a work area set aside in your home.
The table below shows the deductions you can claim for the three options that exist for a taxpayer to “work from home”.
|What you can claim||How you operate your business|
|Home is your place of business and you have a home work area||Home is not your place of business but you have a home work area||You work at home but you don’t have a home work area|
Cost of owning or renting the house
Cost of using a room (such as gas or electricity)
|Business phone costs||Yes||Yes||Yes|
|Decline in value of office plant and equipment (such as desks, chairs and computers)||Yes||Yes||Yes|
|Depreciation of curtains, carpets, light fittings, etc||Yes||Yes||No|
Once you determine the costs that you can deduct, you are required to keep the relevant records. These can be:
- receipts or other written evidence of your expenses – including receipts for depreciating assets you have purchased
- diary entries you make to record your small expenses ($10 or less) totalling no more than $200, or expenses you cannot get any kind of evidence for, regardless of the amount
- itemised phone accounts from which you can identify work-related calls, or other records, such as diary entries (if you do not get an itemised account from your phone company)
- a diary you have created for work to estimate how much you used your equipment, home office and phone for business purposes over a representative four-week period.
Consult this office for more, but also here is a home office expenses calculator from the Tax Office that will help you calculate the amount you can claim as a tax deduction for home office expenses for the 2011-12, 2012-13 and 2013-14 financial years.
One important point to remember is that should you use any portion of your home as a place of business, the main residence exemption to capital gains tax (because it is your principal place of residence) is generally relinquished for that portion. Consult this office for the implications this may have on your tax situation.