According to Effie Zahos, Nine’s Money Editor, the eligibility for work-from-home tax deductions for Australians hinges on three calculation methods: fixed rate, actual cost, and occupancy expenses. With approximately 36% of Australians working remotely, understanding these methods and maintaining rigorous records is crucial.
For those whose home office setup is minimal, such as working from a kitchen table, the fixed rate method is the only option available. Under this method, Australians can claim 70 cents per hour for home work—an increase from the previous rate of 67 cents. This claim covers various expenses, including energy, internet, phone, and stationery. Additionally, any office technology and furniture can be claimed separately.
However, for individuals with a designated room designated as a home office, they can opt for the actual cost method. This approach allows them to claim only the work-related portion of their household expenses, which can be complex to calculate. Although more detailed, this method may yield larger deductions. For instance, a person working from home three days a week over 48 weeks could potentially claim $450 more by utilising this method, compared to the fixed rate, by allocating work-related proportions of their internet, phone, and electricity bills.
The most substantial deductions could be accessed through the occupancy expense method, but it’s exclusive to those operating a business from home. This method permits claims on expenses associated with owning or renting a home, such as mortgage interest, rent, and various council and water rates. A significant caveat is the potential for triggering capital gains tax, which can occur with these claims.
It’s also essential to note that if personal services income rules apply to one’s business, they might be unable to claim occupancy expenses.
Overall, navigating the work-from-home tax deduction landscape requires careful consideration of the applicable methods and their compliance requirements. Keeping accurate records is paramount to maximise potential claims and ensure compliance with Australian tax regulations.
This information serves as a general guide and should not be construed as personal financial advice. Individuals are encouraged to assess their circumstances and consult a financial advisor before making any claims based on this information.