Working from home deductions

What can I claim? |  Running expenses |  Telephone and occupancy expenses |  Depreciation on equipment

If you produce your income at home, and incur expenses in using your home as your 'office' or 'workshop', you may be able to claim deductions and expenses.

Note: If you are operating as a small business from your home, and need to find out about deductions available, read 'Home based business deductions' in our Small Business section.

If your home is used in connection with your income earning activities but isn't a place of business (that is, your home is not your principal place of business, but you might do a few hours of work in your living room), there are specific rules around claims.

The Tax Office views expenses associated with a person's home as those of a private nature, and therefore no deduction for 'everyday' expenses is allowed. However, you may be able to claim a deduction for home office expenses where additional costs are incurred based on diary records of a representative four week period, or, the actual expenses.

What can I claim?
In broad terms, expenses fall into the following categories: running expenses, telephone and occupancy expenses (only if the home is used as a place of business), and depreciation on equipment.

Running expenses
A deduction covering electricity, gas, and depreciation on office furniture may be able to be claimed – worked out by the actual amount paid or at 34 cents an hour. You aren't able to claim if no additional cost is incurred – for example if you are working in a room where your family was watching television; or if the income producing use of the house was incidental rather than substantial.

If you do claim a deduction on your utilities, you need to be able to demonstrate how you arrived at the amount you're wanting to claim as a deduction.

Telephone and occupancy expenses
Work calls can be identified either through providing an itemised telephone account, or from keeping a diary over a representative four week period which will establish a pattern for the Tax Office to understand usage.

If you rent your telephone, the rental charge may be partly deductible if you are 'on call' or supposed to make contact with your employer or clients regularly. This can be calculated by dividing your business calls (both incoming and outgoing) by your total calls (incoming and outgoing).

Note that occupancy expenses such as mortgage interest and home insurance are only deductible where the home is a place of business.

Depreciation on equipment
Depreciation on home office equipment – including furniture, carpets, computer, printer, photocopier, scanner, modem (used only partly for work purposes) is apportioned and based on a diary record kept over a four-week period, covering income related and non-income related use, showing the nature of the use of the equipment, whether that use was income producing and the period of time it was used for.

Deductions are generally only available for electricity and for the decline in value of office furniture. You aren't able to claim a deduction in value on your curtains, carpets or light fittings. You are also not able to claim the cost of owning or renting the house, unless a specific area – generally a room – is set aside solely for business use.

If you plan to claim a deduction on utilities, you must be able to demonstrate how you calculated the expenses. You can't base your claim on a floor area basis as the floor plan is also used for non-business purposes.

There is a lot more detail about home-based business expenses, deductions and tax strategies, as well as depreciating assets, in our Small Business section (click here to go there).

Last reviewed 27/07/2012

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