Conditions of working from home
In general, the deductions you can claim depend on whether:
- you have a work area – a room such as a study or spare room is set aside primarily or exclusively for work activities but your home isn’t your principal place of business – for example, you may have an office elsewhere, but work at home after hours
- you don’t have a work area – your principal place of business is not at home, nor do you have an area or room primarily or exclusively set aside for work, but you do some work at home – for example, you might work for a few hours in the lounge room
- your home is the principal place of business – a business is run from home and a room is set aside exclusively for business activities. If this is your situation, see Running your business from home.
If you are only working from home due to COVID-19, refer to – Employees working from home.
The following table set out the deductions you may be able to claim if your home is not your principal place of business.
|Deductions you may be able to claim||You do have a work area||You don’t have a work area|
|Cost of using a room’s utilities such as gas and electricity||Yes||Yes|
|Work-related phone costs||Yes||Yes|
|Decline in value (depreciation) of office plant and equipment such as desks, chairs and computers||Yes||Yes|
|Decline in value (depreciation) of curtains, carpets and light fittings||Yes||No|
|Occupancy expenses such as rent, mortgage interest, insurance and rates||No||No|
For more information about the expenses you can claim and record keeping requirements, see Home office expenses.
Capital gains tax implications
In most cases, if you are working from home as an employee, regardless of whether or not you have separate work area, there will be no capital gains tax (CGT) implications for your home. This is the case even if you claim home office expenses.
CGT may apply if you are running a business from home or you claim occupancy expenses (like mortgage interest repayments or rates).
If you do claim occupancy expenses, you don‘t get the full main residence CGT exemption, although you may be entitled to a partial exemption.
Temporary work from home
If you’re an employee and temporarily work from home due to recent events, such as COVID-19 (coronavirus), bush fire and drought, you may be able to claim a deduction for expenses you incur relating to that work.
You may be able to claim a deduction for additional running expenses you incur such as heating, cooling and lighting. You can also claim the work-related proportion of the decline in value of office equipment.
In most cases, if you work from home as an employee and claim working from home expenses, there are no capital gains tax (CGT) implications for your home.
You must keep records to show these expenses and how you have calculated your claim.
If you are only working from home due to COVID-19, please refer to – Employees working from home.
Expenses you can claim
You may be able to claim:
Check out the table below for the expenses you can claim as well as the three ways you can work at home, including::
- Home is your principal place of work and you have a dedicated work area that is unlikely to be suitable for domestic use.
- Home is not your principal place of work but you have a dedicated work area – for example a study.
- You work at home but you don’t have a dedicated work area – for example, you use a room with a dual purpose such as a lounge room.
|Expenses||Home is principal workplace with dedicated work area||Home not principal workplace but has dedicated work area||You work at home but no dedicated work area|
|Running expenses||Yes||Yes||No (see note 1)|
|Work-related phone and internet expenses||Yes||Yes||Yes|
|Decline in value of a computer (work related portion)||Yes||Yes||Yes|
|Decline in value of office equipment||Yes||Yes||Yes|
If you work from home, you can claim the work-related proportion of your running expenses. These include:
- home office equipment including computers, printers, telephones and furniture and furnishings. You can claim the
- full cost for items up to $300
- decline in value for items over $300
- heating, cooling and lighting
- the costs of repairs to your home office equipment, furniture and furnishings
- cleaning costs
- other running expenses including computer consumables (for example, printer paper and ink) and stationery.
You can claim a deduction of 52 cents for each hour you work from home instead of recording all of your actual expenses for heating, cooling, lighting, cleaning and the decline in value of furniture.
This rate is based on average energy costs and the value of common furniture items used in home business areas.
To claim using this method, 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 then 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.
You need to separately work out all other home work area expenses, such as:
- phone and internet expenses
- computer consumables and stationery
- decline in value on computers or other equipment.
If you have a dedicated work area, you can claim additional running costs and the decline in value of office furniture used in the area for work purposes.
To calculate actual expenses for your dedicated work area, 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 at home
- work out the decline in value of depreciating assets and
- keep receipts showing the amount you spent on the assets
- work out the percentage of the year you used those depreciating assets exclusively for work – you can claim a deduction for the proportion of the decline in value that reflects your work-related use of the depreciating assets
- work out the cost of your cleaning expenses by adding together your receipts and multiply 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 office
- 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.
You must also take into account if any other members of your household use the home office and, if so, apportion your expenses accordingly.
To claim a deduction for an asset that cost $300 or more, you need to calculate the decline in value for both the period you:
- owned the assets during the income year
- used the assets for work-related purposes.
You can use the depreciation and capital allowances tool to calculate your deduction for the decline in value of equipment, furniture and furnishings that cost more than $300, use the depreciation and capital allowances tool to work this out.
If you don’t have a dedicated work area, you should work out the actual cost of your heating, cooling and electricity expenses. You can do this by working out the cost of running each unit you used per hour and multiplying that by the hours you worked from home. The amount of the additional expense is generally small, especially if there are other people using the area at the same time you are working. In those circumstances, there is no additional cost for lighting, heating or cooling.
Records you must keep
If you’re an employee who works from home, you must keep records such as:
- diary entries for a representative four-week period to show your usual pattern of working at home that show
- you worked from home and made work-related phone calls
- how you work out how much you used your equipment, home office and phone for work purposes over a representative four-week period
- receipts or other written evidence, including for depreciating assets you have purchased
- diary entries to record your small expenses ($10 or less) totalling no more than $200, or expenses for which you can’t get any kind of evidence
- itemised phone and internet accounts (paper or electronic) from where you can identify work-related calls and internet use, or other written records, such as diary entries if you don’t get an itemised bill.
If you use the four-week representative period to calculate your usage over the income year and your usual pattern of work changes, you will need to keep separate records to show your usage.
For example, if you usually work from home one day a week and due to an emergency situation such as COVID-19, bush fire or drought you’re required to work from home for an extended period, you will need to keep records for both:
- the actual hours you’ve worked from home due to the emergency situation
- your usual working from home arrangements.
Your four-week representative period will no longer be valid in these circumstances.
Home office calculate
Home office calculator – this calculation will take between five and 20 minutes to complete.
For further information, contact your Client Manager at FinCare.
Call 02 9542 4655 or email firstname.lastname@example.org.
The information provided in this article does not constitute specific advice. For further information , you should contact your professional adviser.