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In today’s modern work culture, working from home is becoming more and more common. The advent of technology has allowed for practically anyone to take their work tasks and perform them from the comfort of their own living rooms. But like any emerging trend, there are gray areas that need to be clarified to avoid trouble.

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One such area is the topic of tax deductions. Working from home gives people more time with family, lessens travel costs and allows people to work flexible hours which can better suit their lifestyle.

But this arrangement has proven to be a challenge for the Australian Taxation Office, as there is a fine line between business and personal life when your office is next door to your bedroom.

Last financial year, 6.7 million taxpayers claimed $7.9 billion in deductions categorised under “other work-related expenses”, which include expenses from working from home. The ATO doesn’t believe that all those deductions are legitimate. So to shed some light on this murky topic they’ve put some clear demarcation lines on what can be claimed as deductible expenses for people who work from home.

Here’s a quick rundown of expenses that you can claim as tax deductibles when you work from home:

Running expenses

When you have a dedicated work area such as a study or home office, running expenses such as electricity, cleaning, office equipment, cooling and heating can be claimed as a deductible expense.

These expenses, however, must be made separate from that used for home purposes. If you or your family use the space for non-work purposes, you can only claim some of that expense. Running expenses can either be claimed at a fixed rate of 45 cents per hour, tracked via a logbook, or as an actual expense with proper documentation.

Occupancy expenses

Occupancy costs such as rent, interests on home loans, property insurance, land taxes and such can only be claimed if your home is the official place of business. If you have an office outside of home, this cannot be claimed for tax deductions.

Computing for occupancy must take into account the percentage of the year that you spent working from home. Proper documentation will be necessary to make this claim.

Work-related phone and internet expenses

Work-related and internet connection expenses can be claimed for people who run their business or work primarily from home. It’s unlikely that you can claim 100 percent of the cost for deductions unless you use your lines completely for work.

If your employer provides you with a phone, this expense cannot be claimed. Casual workers are also excluded from this deduction. Anyone else can claim up to $50 for phone and internet expenses without substantiating the claim.

Decline in value

For depreciable assets like laptops, printers and such, you could possibly mark off the decline in value if the cost of the item was over $300 to purchase. Furniture used within the office space can also be claimed as an expense but only if running costs are claimed as an actual expense. When using the fixed rate of 45 cents per hour, depreciation of office space furniture cannot be claimed.

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Need help with your deductions?

If you’re looking to get tax deductions to your business or office but don’t have the time or know-how to get it done, you can get help. Often, because changes like these happen all the time, it’s better to outsource such tasks so that you can focus on getting work done. If you need help with your tax deductions, you can always reach out to us. We’d be more than happy to help you in any way we possibly can!

Topics: Finance

Lisa Andrews

Written by Lisa Andrews

Lisa has 15 years experience specialising in C+ roles in tax , business services, software, engineering and online marketing. Her firm and long-standing belief is that she can help any business achieve their goals. Lisa founded IGNITE Alliance to share her knowledge and experience with her clients, and propel them forward using the power of accounting, technology and online marketing so they can love coming to work. Beneath the smiling exterior is a savvy business strategist, with a string of successful businesses grown, system implementations, business modelling and procedures that help you “make money while you sleep.”

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