Home Office Deductions – It’s no longer a grey area

It’s the end of a financial year, unlike any we’ve ever seen before.

Due to the pandemic, we have seen more and more people working from home and able to claim home office deductions. Which is why the ATO has flagged that they will be looking at home office expenses claimed in the 2021 year more closely than ever.

To make life easier for everyone, they are allowing a cents per hour claim of 80 cents per hour up from the traditional 52 cents per hour. You just need to make sure you’ve kept a record of the hours worked via timesheet, roster, diary or something similar. What could possibly be the downside?

Well, what isn’t advertised is what the ATO refers to as the ‘shortcut method’. It not only covers electricity and gas expenses, but phone; internet; computer consumables; stationery; and depreciation of equipment and furniture. When you add this all up, it no longer sounds as appealing.

By alternatively claiming the ‘fixed rate method’, you can claim 52 cents per hour, and still claim work related phone and internet usage and office equipment. It is important to note that you’re unable to claim depreciation on home office furniture and furnishings if you plan on claiming 52 cents per hour. You also need to make sure that you have kept clear records of your phone and internet usage and be mindful of who else uses these services in your household.

A third method of deduction you may use is the ‘actual cost method’. Instead of a cents per hour method, you calculate heating; cooling; and lighting costs based on the relevant utility bill, factoring in cost per unit of power and average kilowatts per hour. This is an exhaustive process but is beneficial in the right circumstances.

A reminder that the cost of coffee; tea; milk; and toilet paper are not, and never have been, deductible. Also note that rent; mortgage interest; water; and rates are generally not available deductions to a wage/salary earner.

So you’re keen to get your tax return done and have heard about everything you can claim. Isn’t it funny that you’re never told what you can’t claim? Make sure you keep clear records and receipts and remember that the ATO sees everything in black and white.

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.