Which home office expenses can I claim?

Thursday, Jun 12, 2014

If you operate your business in full or in part from home and are required to use your own computer, phone or other electronic devices for work purposes, you may be able to claim a deduction for your costs. There are however rules you need to adhere to and records you need to keep.

The deductions you may be able to claim are for:

  • occupancy expenses such as rent, mortgage interest, rates, land taxes and house insurance premiums
  • running expenses such as:
  1. home office equipment such as computers, printers and telephones, the cost (for items costing up to $300) or decline in value (for items costing $300 or more)
  2. work-related phone calls (including mobiles) and phone rental (a portion reflecting the share of work-related use of the line) if you can show you are on call, or have to phone your employer or clients regularly while you are away from your workplace
  3. heating, cooling and lighting
  4. the costs of repairs to your home office furniture and fittings, and
  5. cleaning expenses.

Being able to claim these expenses hinges on whether your home is your place of business and if you have an area set aside exclusively for business activities.   If your home is indeed your place of business and you have an area set aside exclusively for business activities, you may be able to claim both occupancy and running expenses. If you carry on your business elsewhere however and also do some work at home, you cannot claim occupancy expenses – even if you have a home work area set aside.   The table below shows the deductions you can claim for the three ways you can work at home:  

What you can claim How you operate your business
  Home is your place of business and you have a home work area Home is not your place of business but you have a home work area You work at home but you don’t have a home work area
Occupancy expenses Cost of owning or renting the house Yes No No
Running expenses Cost of using a room (such as gas or electricity) Yes Yes Yes
Business phone costs Yes Yes Yes
Decline in value of office plant and equipment (such as desks, chairs and computers) Yes Yes Yes
Depreciation of curtains, carpets, light fittings, etc Yes Yes No

  Once you determine the costs that you can deduct, you are required to keep the relevant records. These can be:

  • receipts or other written evidence of your expenses – including receipts for depreciating assets you have purchased
  • diary entries you make to record your small expenses ($10 or less) totalling no more than $200, or expenses you cannot get any kind of evidence for, regardless of the amount
  • itemised phone accounts from which you can identify work-related calls, or other records, such as diary entries (if you do not get an itemised account from your phone company)
  • a diary you have created for work to work out how much you used your equipment, home office and phone for business purposes over a representative four-week period.

One important point to remember is that should you use any portion of your home as a place of business, the main residence exemption to capital gains tax (because it is your principal place of residence) is generally relinquished for that portion.

Contact our office on (08) 8384 4400 for more information on home office expenses or for the implications of CGT.