In Australia, you can calculate these deductions using a fixed rate or actual cost method. This guide covers which expenses are claimable and how to calculate the portion you can claim.
What are working from home tax deductions?
Working from home tax deductions are the portion of your household expenses that you can claim as tax-deductible business expenses. To claim these expenses, you must be able to prove that working from home is part of generating business income.
Who can claim a tax deduction?
Those who can claim a tax deduction are generally self-employed — either a sole trader, in a partnership or own a company — and use their home for business purposes.
If you're an employee who works from home, your employer may choose to reimburse you for the costs associated with working from home, but they're not legally required to do this.
What expenses may be claimable?
The expenses that may be claimable can start out small at first, but quickly add up over time and significantly reduce your tax bill year-on-year.
Here’s a list of the most common working from home expenses you can write off:
Computers and home office furniture
Computers and home office furniture such as desks and chairs are 100% claimable if the purchase price is under $300. If items are over $300, they must be depreciated instead.
Utilities including electricity, gas and water
Utilities, including electricity, gas and water are claimable expenses. However, you can only claim a portion of these costs. This portion relates to the area of your home that you use for business.
Phone and internet
Phone and internet fall into the claimable expenses bucket, too. You can claim a portion of your monthly internet bill. If you have a phone that you only use for business purposes, you can claim 100% of the data and call charges. If you use the same phone for personal and business use, you need to apportion and claim only the business use portion.
Home office equipment and stationery expenses
Home office equipment and stationery expenses used for business purposes are also 100% claimable. Keyboards, computer mouses, adaptors, paper, pens, printer ink cartridges – all costs that can go towards reducing your tax bill.
Occupancy expenses
In some limited circumstances, occupancy expenses including rates and mortgage interest (if you own your home) or rent can be claimable expenses if you’re eligible. Like utilities, you can only claim a portion. With mortgage interest, you can claim mortgage interest only (not the principal portion of your repayments).
House and contents insurance
House and contents insurance are like property expenses — you can claim a portion of the costs based on that area of your home that you use for business.
How to calculate your tax deductions
To calculate your tax deductions in Australia, you can use a fixed rate or actual cost method.
Keep in mind these four rules:
The expense must be business-related.
If the expense is for a mix of business and private use, you can only claim the portion that’s business-related.
You must keep records to prove the expense was part of generating business income.
You can't claim the GST component of working from home tax deductions (however you can claim it as a GST credit on your Business Activity Statement (BAS).
Fixed rate method
The fixed rate method allows you to claim 67c of each hour you work from home during an income year and doesn't require you to have a dedicated home office. The rate includes the total deductible expenses for the additional household expenses you incur when working from home, for example, power, water, home internet.
You can't claim an additional separate deduction for these expenses. For example, if you have a mobile phone that's for work only, you won't be able to claim mobile phone expenses when you're not working from home. To do this, you'd need to use the actual cost method.
Actual cost method
The actual cost method works by calculating the actual additional expenses of working from home. When a household expense is for private and work purposes, you can only claim the business-related portion. You can use the ATO home office calculator to figure out the portion of an expense that you can write off.
How to claim your tax deductions
To claim your tax deductions, you must keep accurate records of:
The time you spent working from home — this could be a timesheet or work diary.
The additional household expenses of working from home — you'll need to keep receipts, bills and other documents as proof.
How you worked out the amount of your deduction — what method you used.
MYOB’s expense management software provides an easy, paperless way to manage your expenses.
With the MYOB Capture app, you can take photos of your receipts and import digital bills, and all the details will be captured and stored in your software.
You can also connect your bank account, so every transaction is automatically matched and reconciled or expenses are assigned to a specific job or customer.
That way, when filing your sole trader tax return, all your expenses are in one place, making it easy for you to calculate your tax deduction.
Work from Home Tax Deduction FAQs
Is there a limit to how much I can claim?
There isn't necessarily a limit to how much you can claim, but there are specific rules around the portion of working from home expenses that are tax deductible. If you're unsure about which home office expenses you can and can't claim, and how much, we recommend speaking to an accountant who can give you advice that's specific to your business.
How much of your phone bill can you claim?
You need to apportion costs and claim only the business use percentage where you use the same mobile phone for both personal and business activities. If you have a secondary phone that's used for business purposes only, you can claim 100% of your phone bill.
Are kilometres to and from work claimable?
The kilometres to and from work are generally categorised as private travel and therefore aren't claimable. If you're a self-employed sole trader or company and you work from home, you may be able to claim travel costs if you're travelling for business purposes — for example, meeting with a client on-site, attending a conference or going overseas to source a new supplier.
Make working from home work for you
For many self-employed people, working from a home office is how they make a living. It's an extremely cost-effective option compared to leasing commercial office space, and there are additional perks — like using working from home expenses to reduce your tax bill.
To claim your tax deductions, you need to keep accurate expense records — and that's where MYOB's expense management software makes life a whole lot easier. Get started with MYOB today!
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.
MYOB is not a registered entity pursuant to the Tax Agent Services Act 2009 (TASA) and therefore cannot provide taxation advice to clients. If you have a query concerning taxation including filing your BAS return or annual tax statements then you should consult with your accountant or other registered tax adviser.