Tax deductions for employees working from home
As an employee working from home you may be able to claim home running costs, telephone and internet expenses
A major impact of the coronavirus pandemic is that more people are working from home than ever before, either by choice or because they have been directed to do so by their employer.
If you are one of those employees working from home, you may be able to deduct some of the expenses you incur in running a home office or for phone and internet usage.
The key to claiming these deductions is to understand when expenses are deductible and what you must do to support your tax claim.
Home office running expenses
Running expenses such as heating, cooling and lighting costs are only deductible if you exclusively use these services while performing work at home.
For example, the ATO says that you would not be able to claim deductions for these expenses if you work on your laptop while sitting next to your partner who is watching TV.
However, if you perform work in a room when others are not present, or in a separate room dedicated to work activities, you may be able to claim some running expenses.
In practice the ATO accepts two methods for calculating your deduction:
- The easy way: a simple rate of 52 cents per hour worked, which covers all the running expenses you can claim (including depreciation on home office items such as furniture). To substantiate your deduction, you only need to record how many hours you worked from home in the income year.
- The hard way: as an alternative, you can claim the work-related proportion of actual expenses incurred by keeping detailed records and evidence. This is a more complex method suitable for employees who would be entitled to claim more than the 52 cents per hour rate. You should seek advice about this method to ensure your evidence will meet ATO requirements.
Phone and internet expenses
You can claim up to $50 in total for all work-related device usage charges (phone calls, text messages and internet) with basic documentation only. The ATO accepts these methods of calculation:
- 25 cents per work call for the home phone;
- 75 cents per work call for the mobile phone;
- 10 cents per work-related text message for the mobile phone;
- for internet data, basic records reflecting time spent or data used for work purposes.
However, if you need to deduct more than $50, you must keep detailed written evidence to substantiate the work-related proportion of your expenses.
Deductions for electronic devices are calculated separately. If you purchase these items to help you earn income, you may be entitled to an immediate deduction for items costing $300 or less.
For devices and other office equipment costing more than $300, you could claim depreciation based on the amount of work-related use of the asset.
What you can’t claim as an employee
Occupancy expenses such as rent, mortgage interest, council and water rates, land taxes and insurance premiums are not deductible for employees who work from home.
Check your expenses
If you work from home as an employee, talk to us today to check whether you are claiming all the expenses you are entitled to. We can also help you ensure that you are keeping adequate records and evidence to protect you in the event of an ATO audit.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.