Working from home isn't new, but it certainly became the new "normal" during 2020. Some businesses found that when working from home their staff were actually more productive.
If you work from home, even if it is only from time to time, there are two ways to work out the deduction you can claim in your tax return.
Method 1 - Fixed rate
This method is for the person who spreads everything out on the family dining table.
First you need to work out the total number of hours worked at home.
For example a Teacher might ordinarily spend 6 hours over a weekend each week during the first 8 weeks of a school term and 10 hours during the last 2 weeks of each term.
Your total hours are then multiplied by an hourly rate. The rate has been determined by the Australian Taxation Office, currently 52 cents per hour.
This rate covers the following expenses:
- depreciation of home office furniture
- electricity
- cleaning
Using this method you can also claim the work-related use of phone and data expenses, depreciation of office equipment other than furniture items.
There is an alternate rate available from March 2020 to June 2022 of 80 cents per hour. The higher rate is intended to cover the work-related use of phone and data expenses. In our experience most people have a better result claiming the lower rate AND work-related phone and data expenses.
Method 2 - Actual cost
This method is best for the person who has a separate room set up as a permanent office or work space in their home. It could be a spare bedroom or even a corner of a shared living space.
Actual cost includes all the costs associated with your home, such as:
- Rent
- Electricity
- Insurance
- Rates
- Interest on your mortgage
- Cleaning
Your deduction is calculated by comparing the floor area of your entire home with the floor area of the space that is used for work.
Deduction = Work floor area รท Total floor area x Total eligible expenses
There is definitely more work involved in this method. Please ask about this when preparing your next tax return.