Nowadays, more and more people are opting for self-employment and freelancing in Australia. As per a report, 1.38 million Australians were self-employed in 2021. This figure comprised 10.6% of the total workforce in the country.
With benefits like flexibility and a better work-life balance, working from home is slowly becoming a mode of choice for professionals in the country.
Technology has given impetus to this trend as anybody can now get access to opportunities on the internet. The best part is that professionals who work from home and are self-employed can also claim tax deductions.
Let’s get into this in detail and understand the requirements and the items on which individuals can claim deductions while working from home.
Working From Home Tax Deductions: 5 Areas
The Australian Taxation Office (ATO) offers tax claims on these five categories:
Everyone requires a basic office setup. The good news is that the ATO allows individuals working from home to claim tax deductions for setting up their home office.
You can invest in furniture, including chairs, desks, lamps, shelves, and filing cabinets, and get a tax deduction.
It’s a no-brainer that any person working from home will need equipment to work and complete their assignments.
The ATO allows tax deductions on equipment like computers, smartphones, tablets, printers, scanners, fax machines, wireless routers, network drives, and other work-related equipment.
Apart from new equipment, you can also claim a deduction on the cost of repairs to your home office equipment, furniture, and furnishings. Cleaning costs are also included.
You can fully claim for items that cost up to $300 on your next tax return. However, if you have items costing more than $300, you need to spread them out over several years.
The ATO considers the lifetime of an item to give you the full tax deduction. Different assets depreciate at different rates.
For instance, the tax office considers the life of a desktop to be four years. Thus, it will take as many years to file your returns and claim your full tax deduction. You can see the comprehensive list of depreciation for assets here.
As you work from home, you can also claim a portion of your utility bills, including electricity and gas for heating, cooling, and lighting.
It’s important to note that you can’t claim your entire bill because the expense as a whole is not for your business. As you work from home, you’re also using these facilities for your personal use.
You can either claim a fixed rate or work with an accountant to calculate your expenses. However, that’s a tedious process, and you’ll also have to pay to avail of the accountant’s services. It’s advisable to go with a method that’s easy to work with.
When you work from home, you are, in all probability, using some form of telecommunication to interact with clients and customers.
The ATO allows you to claim deductions on such expenses, like bills for your home phone, mobile phone, and a dedicated voice or fax line for your home office. You can also claim the expenses for home or mobile broadband bills.
As in the previous case, you’ll not be able to claim the entire amount as some of it are for personal use. You can claim a fixed rate or work out your expenses.
It’s better to go with the second option if you’re extensively using these for work. Your accountant can help you work out a reasonable figure. Ensure you have bill records as proof.
Although not much, supplies also account for some expenses when you’re running a home business.
You can claim deductions on your expenses for stationery, printer paper, toner, pens, notepads, staples, paper clips, sticky tape, envelopes, and stamps.
Tax Deductions for Employees Working from Home
Employees who work for an employer but work from home can also claim deductions:
Eligibility to Apply for Deductions
- You must be working from home and fulfilling your employment duties. It’s not just about checking emails or taking calls. You must be doing much more and contributing in a meaningful manner.
- You should be incurring some additional expenses as a result of working from home.
Expenses On Which You Can Claim Deductions
- Electricity expenses that are used for heating, cooling or lighting
- Depreciation in the value of office furniture, furnishings, and equipment like your desktop
- Internet and phone expenses
Plan Your Taxes Today!
Working from home comes with its own set of benefits. More than anything, it allows you to explore your interests and do what you wish.
The best part is you can claim taxes on the expenses for setting up your home office and expenditures on utilities.
Planning your taxes with an accountant will help you make the most of these facilities provided by the ATO and make your business profitable.