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An Employee’s Guide to Home Office Expenses - What to Know

If you are an employee working from home, the expenses you incur related to work tend to mix up with your expenses at home. You may also notice that your utility bills and other outgoings have become significantly higher as you need electricity every day to get your work done.


The good news is that you may be able to claim a deduction for all work-related expenses you incurred. The Australian Taxation Office or ATO has an extensive list of tax deductions available for businesses in the country, and this includes home office expenses.


In the sections below, we’ll be walking you through some of the fundamental aspects of home office expenses you need to know.


What Kinds of Expenses are Tax Deductible?

  • Home Office Running Expenses - These include all utilities needed to run your home office, such as electricity, gas, and cleaning, as well as the depreciation of home office items.

  • Home Office Occupancy Expenses - These refer to the rent, mortgage interest, or house insurance premiums you pay for your home office. However, take note that only those who are using a part of their home exclusively as their place of business can claim a deduction for these kinds of expenses.

  • Electronic Device Usage Expenses - These include expenses incurred from phone calls and Internet use. These kinds of expenses must be calculated and claimed per Division 40 of the Income Tax Assessment Act of 1997.


If you use your home office for work, you must familiarise yourself with the items that may be tax-deductible as mentioned above. You may also browse the ATO website to access a full list of deductions, especially in your industry.


If you plan to claim for home office expenses, you need to establish that those expenses have been incurred by presenting evidence.


What Documents Do You Need in Evidencing Incurred Expenditure?


One of the fundamental pieces of evidence in proving that an expense has been incurred is invoices in the name of the homeowner. Those in the name of another person can also be used to substantiate an expense when the circumstances are relevant.


One example of an acceptable situation is when the individuals are a family, such as a husband and a wife. In this circumstance, the two share accommodation and contribute to the cost of expenses together.


In the absence of invoices, corroborating evidence such as bank and credit card statements in the taxpayer’s name may also be used to establish that a taxpayer has incurred an expense.


How Do You Prove The Extent of Deductible Expenses?


You must submit evidence to prove your deductible work use from the total expenses incurred. Here are some ways to do this:

  • Provide records that show your detailed usage patterns over a representative period, such as a journal showing work use over four weeks.

  • Provide itemised records substantiating the proportion of deductible work use for the whole year.

  • Provide a reasonable estimate if your claim for your home office running expenses is small.


You may only use a representative period if you have one—if your work use proportion is constant throughout the year. If you use a representative four-week period, you have to multiply the result over the amount of your working year to get the annual amount.


Conclusion


When you have a home office and use it for your everyday work, knowing what tax deductions you can claim will help your financial situation. However, keep in mind that costs split between personal and business use may be challenging to work with.


You need documents and evidence to support the proportion of the cost you wish to claim. With this, it is best to keep an accurate record of your home office expenses and consult a professional tax accountant in Gold Coast to help you throughout the application process.


When it comes to anything accounting in the Gold Coast, QLD, we’re the ones to call! At New Wave Accounting, we’re all about empowering employees and businesses to understand and build confidence in their figures. If you’re ready to understand taxes better and reach your goals faster, get in touch with us today!

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