In an unprecedented two years, many Australians have seen working from home become the norm.
A solid proportion of the Australian working population went from working 9-5pm at the office to juggling work and homeschooling from the comfort (or discomfort!) of our own homes.
So, if you were one of the ones who saw you trade the high rise office, suits and heels for a knock-up work nook complete with ugg boots and a new Zoom membership, what does it mean for your tax?
Claiming your home-based business expenses
If you operate some or all of your business from home, you may be able to claim some of your home-based business expenses in your tax return.
What is a home-based business?
First of all, it is important to clarify if you are indeed a home-based business.
A home-based business can be run at home – where you do most of your work at home. Or from home – where most of our work is done on-site (such as at a building site) and you invoice and do your paperwork from home.
It is important to note that the below expenses are only applicable to the portion of your home that is allocated to your business.
What can a home-based business claim?
Such as electricity (to power all those Zoom meetings), internet costs, phone, cleaning, furniture, furnishings and depreciation of plant and equipment.
Such as rent, mortgage interest, rates, house insurance
Alongside these expenses, you can claim motor vehicle costs for the time spent going from your home (as your principal place of residence) to meetings and other work purposes.
What records do you need to keep?
It is important to keep records for 5 years included the method to which you calculated your expenses.
Is there any downfall?
If you are claiming occupancy expenses such as mortgage interest, there may be Capital Gains Tax implications if you decide to sell your house down the track.
Working from home as an employee
Alternatively, if you are working from home as an employee, you can claim expenses on an hourly basis that relate to your work.
This can be done in two ways:
Fixed rate method
When using the fixed rate method, you can claim 52 cents for each hour worked from home for running expenses such as electricity, internet costs, phone, cleaning, furniture, furnishings and depreciation of plant and equipment.
The shortcut method is a temporary method for use throughout 1st March – 30th June 2020 (for the 2019-2020 income year) and 2020-21 and the 2021-22 income years, ending on June 2022.
You can use this method if you worked from home during this period and incurred additional expenses and if you have a record of the hours worked from home. You can claim 80 cents per hour for the hours worked from home which will cover the costs of the above running expenses. You must have a record, roster or diary of hours worked to claim this method.
For more information, you can visit the ATO or give our friendly team a call to help you navigate your home-based business expenses this year.