With our business world having changed vastly over the past 2 years the WFH (Work From Home) concept is much more common now:
For WFH there are certain expenses that you are able to claim as a tax deduction.
WFH is officially defined as “You have to ACTUALLY be working from home to fulfil your employment duties or run your business”, so you cannot claim these expenses if you are occasionally “checking emails, taking the occasional phone call” etc
There are 6 items that can be claimed for WFH:
1) Electricity
2) Internet
3) Phone
4) Cleaning
5) Office (declining value of your office furnishings)
6) Occupancy (a portion of occupancy expenses)
There are 3 ways to establish how much you can claim:
· The Fixed Rate Method
· The Short Cut Rate (only available in Australia until June 2022)
· The Actual Cost Method
The Fixed Rate Method is a flat rate of 0.52c per hour worked. (Covers heating, cooling, lighting, cleaning and declining value of your office furnishings only – the rest you still need to use actual cost method for)
The Short Cut Rate Method is a flat rate of 0.80c per hour worked – This covers all 6 expenses. (After June 2022 this will revert to The Fixed Rate Method of 0.52c per hour worked as above)
The Actual Cost Method is a little more complex and is outlined below
Actual Cost Method – What you CAN claim and HOW MUCH can you claim?
Any expenses you have incurred as a result of you working from home can be proportionately claimed
These include:
· Electricity:
Used for heating, cooling and lighting.
This claim would be represented as a percentage of your home floor space used for working from home as well as the amount of time you use it for business.
· Internet:
This claim would be al allocated portion of the time or data used for business usage.
· Phone:
An itemised billing would be required to identify business calls. Once you have done this a couple of times you can establish a pattern of use and this can be used going forward.
If you use a land line then a percentage of the land line costs would be applicable for a claim.
· Cleaning
Cost of cleaning your work-from-home office space only
· The declining value of your office furnishings such as:
o Electronics (laptops / computers, printers and phones)
o Furnishings (desks and chairs)
Dependent on the furnishings, these may be written off straight away or depreciated using the depreciation method that your accountant recommends.
· Portion of occupancy expenses such as:
(These can generally only be claimed by home based businesses, not employees working from home)
o Mortgage interest
o Rent
o Council rates
o House and contents insurances
The above may be claimed if any of the 4 key indicators reflect that your home / portion of your home is being used for business purposes.
§ It is clearly identifiable as a “the place of business” – ie signage out front.
§ All of your business is conducted there are nothing else.
§ Not easily suitable or adaptable for private or domestic use.
§ The space is used exclusively for business and used for business visits from your clients.
This is reflected as a percentage. i.e., if the work-from-home area is 20% of the total floor space of your home, the portion would be 20% on the occupancy expenses.
If you are wanting to work with a bookkeeper who is able to assist you in identifying what you can and cannot claim as a work-from-home expense, I Invite you to reach out to me so we can have a chat and see how I can help you.
