Working from home (WFH) has become more commonplace in recent years, and many more Aussies now have a dedicated home office or workspace. If you have worked from home in the 23-24 financial year, you can likely claim tax deductions that will help lower your taxable income. It’s important to understand the rules around deductions to ensure you are claiming the maximum amount you can without stepping over the line and putting yourself at legal risk.
.
It’s also important to refresh your understanding each financial year because the rules evolve each year as our relationship to WFH in Australia changes.
.
Eligibility Criteria
Before anything, you need to figure out if you are eligible to claim work-from-home deductions. You qualify if you perform your work duties from home some or all of the time. Taking occasional calls and checking emails is not sufficient but if you are completing regular tasks then you meet these criteria.
You must also be able to show that working from home has caused you to incur additional expenses. This doesn’t mean that you have to have gone out and bought a whole new home office set-up in the last 12 months although if you have, I hope you kept the receipts. Things like electricity, home internet and data, stationery, and other expenses that allow you to work effectively from home can be claimed back in a couple of different ways that we will get into later.
What can you claim?
Claiming office supplies
For office or work-related purchases, you’ll need a receipt as proof. Depending on the method you use to claim, if the purchase is under $300 you can claim it as an immediate deduction without needing to provide proof in your tax return. Hang on to your receipts though because if the ATO raises questions about your return you will need to show proof.
For items that cost more than $300 or are part of a set worth more than $300, you can also claim the depreciation of those items, as well as repairs and maintenance of these items.
Claiming Running Expenses
The utilities that allow you to work from home make up part of what you can claim. These include:
- Electricity and gas for temperature control and lighting
- home and mobile internet or data costs
- mobile and home phone costs
You may also be able to claim a portion of your rent or mortgage if you have a dedicated home office or workspace that makes part of your home unusable for other purposes. To claim this, you must be able to prove that you are required to work from home because your employer does not have a suitable workspace that you can use and your work requires you to have a place of business. Along the same lines, those with dedicated home offices may also be able to claim cleaning costs, council rates, and home insurance. Claiming occupancy expenses requires you to meet strict criteria with evidence. You can learn more about occupancy expenses here.
Claiming renovations, builds, and cosmetic changes
If you are a WFH employee, you won’t be able to claim renovations and cosmetic purchases like plants, art, and non-work-related furniture. If you run a business from your home then you might be able to claim those as capital works over a longer term.
Similarly, you generally can’t claim home office builds on your own property as part of your tax deduction unless you are running a business.
How to calculate your deductions:
Fixed Rate Method
The easier way to calculate your deduction is using the fixed rate method, which allows you to deduct 67 cents for every hour that you work from home to cover running costs. You can also claim bigger expenses like technology and furniture, or the depreciation of these purchases, separately.
If you are a do-it-yourselfer, using the fixed rate method is likely going to be your better option. It is simple while still giving you a fair return and options to claim additional expenses. You can also claim your home expenses using this method if you meet the criteria we spoke about above.
Actual Cost Method
The actual cost method will see you, or your accountant, doing a lot more math’s, and is much more in-depth and therefore more accurate. If you suspect that your work-from-home running costs are higher than average, then this might be the right method for you.
The actual cost method works by calculating, as the name suggests, the actual cost of office supplies, running expenses, depreciation, and potentially home expenses if you meet the strict criteria.
How to choose the right method for you
Choosing the right method can feel tricky, but there are a few tricks to help you decide. If you are going through an accountant or have a good skillset for taxes you can calculate both and see which is more advantageous.
If you don’t want to do both, the simple answer is that if your work-from-home situation is fairly standard, then the fixed rate method is likely to be the better choice. If your home office is more expensive to run then the actual cost method might give you a more favourable deduction.
What has changed in 2024
All of what we have spoken about so far is what’s relevant to the 23-24 financial year. One notable change from last year is the increase to 67 cents for the fixed rate method from 52 cents. This isn’t a complete win for your wallet though, as the 67-cent figure now includes some expenses that previously were claimed separately. Most notably, stationery and internet expenses now fall under the flat rate of the fixed rate method.
The other major change is the increased emphasis on record-keeping. Previously you could approximate your work-from-home days but this year you’ll need more concrete evidence. This increased strictness spills over into other areas, which means things you might have been able to get away with in previous years are unlikely to work now.
These changes mean that if you worked from home about the same amount as last financial year, you should expect a smaller reduction in your taxable income.
When to seek professional advice
If you are a business owner who runs your work from your home then this year especially, it will be worth seeing a tax advisor so you know that you are claiming all you are eligible for, especially if you have carried out renovations or building for the benefit of your business space.
If you are looking to claim your rent or mortgage, you are also likely to benefit from visiting a professional. The rules are stricter than ever this year and a mistake could end up being costly.
Summary
If you have worked from home during the 23-24 financial year and you have a dedicated workspace then you can claim a tax deduction. It is worth taking the time to really understand the rules because they are stricter this year with a bigger focus on record-keeping. A professional tax adviser can help you wade through all of this and get you the best deduction possible, so it is worth exploring that if you have a more complex situation.