Claiming Home Office Expenses on your Tax return

If you work from home on your business, real estate investment or/and for your employer, you will be able to claim a portion of your expenses on your tax return. To start claiming home office expanses you will need to have at least one room being utilized as a home office.

It is important to note that the tax office draws a distinction between Running expenses and Occupancy expenses. It is easier to claim running costs on your tax return and only in limited circumstances a deduction may also be allowable for occupancy expenses such as rent and mortgage interest.

1. Running Expanses relate to the use of facilities within the home. These include electricity charges for heating, cooling, lighting, cleaning, depreciation, and the cost of repairs on items of furniture and furnishings in the office.
2. Occupancy expenses relate to ownership or use of a home which are not affected by the taxpayer’s income earning activities These include rent, mortgage interest, water, municipal and and house insurance premiums.

Claiming Home Office Expanses – Running Expanses

You will be able to claim a portion of your running costs such as gas and electricity, or alternatively the tax office allows you to claim a deduction calculated at the rate of 26 cents per hour.
You will also be able to claim other home office expenses, such as telephone, mobile and internet expenses, plus a decline in value of computers, furniture or other equipment. They will have to be calculated separately

Example of home office claim (Portion of Cost)

Gas & Electricity Bills - $1000 a year * 15% = $150 (15% is the ratio worked on business)
50% Depreciation on Computer = $300 (50% of the computer is used for private use)
50%

Example of home office claim (% of Total hours)

26 Cents * 10 hours per week * 52 = $132.5
50% Depreciation on Computer = $300 (50% of the computer is used for private use)

* A deduction is allowable only where additional running costs are incurred by a taxpayer because of income producing activities. Also, the income producing use of the home office needs to be substantial and not merely incidental.

* If home office equipment, such as a computer is used only partly for work or business purposes, then the decline in value deduction is reduced by an amount that reasonably reflects the extent that equipment was not used for income producing purposes

* A deduction is allowable for the cost of telephone calls made in the course of work or business

* Individual taxpayers who claim home office expenses are required to be able to prove that they have incurred such expenses

Claiming Home Office Expanses – Occupancy Expanses

Only in limited circumstances a deduction may also be allowable for occupancy expenses such as rent and mortgage interest. They can be made if your home is used as a “Place of business”.

What is a place of business?
- The area is clearly identifiable as a place of business;
- The area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally;
- The area is used exclusively or almost exclusively for carrying on a business;
- Or the area is used regularly for visits of clients or customers.

Which expenses can be claimed?

In addition to running costs you will be able to claim

Rent (Apartment, house, etc)
Interest on your mortgage
Council and water rates
Home insurance premiums

Example of home office claim - Occupancy Expanses

Rent - $10000 a year * 30% = $3000 (30% is the floor area used for business)

* In most cases, the apportionment of the total expense incurred on a floor area basis is the right method for claiming calculation.

* Where an area of the home is a place of business for only part of the year, it may be necessary for expenses to be apportioned not only on a floor area but also on time basis.

* The ATO allows a deduction for non-capital expenditure on repairs to premises, for the purpose of producing assessable income.

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One Response to “Claiming Home Office Expenses on your Tax return”

1. Kylie Batt Says:
   April 20th, 2010 at 2:20 am

   Совершенно верно! Мне кажется это отличная идея. Я согласен с Вами….

   Агент страховой If you work from home on your business, real estate investment or/and for your employer, you will be able to claim a portion of your expenses on your tax return…..

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