Does working from home have tax issues? In this sponsored post, chartered accountant Gail Freeman has the answer, but it’s not a simple one!

Tran had been told he could claim 80 cents an hour against his tax for using his office at home and wanted me to better explain the rules.

“Tran, like everything in tax, it’s not quite as simple as it seems,” I told him.

“There are three different scenarios when working from home. The first is where you have no office, so you might be working at the dining table. The next is where you have a room set aside at home for your office. The third is where your home is a place of business.”

“Let’s start with the situation where there is no office. The Australian Taxation Office (ATO) specifies that you can claim either 52 cents an hour or 80 cents an hour to cover your running costs.

“You may also be able to claim 52 cents an hour you can also claim for your mobile phone, your computer and your internet connection, but you cannot claim depreciation on your furniture or carpet.

“If you claim 80 cents an hour, which is a special COVID-19 rate and is currently scheduled to finish on June 30, you can’t claim your phone, computer, internet or depreciation.”

Tran thought the 80c an hour sounded much better.

“We can calculate whether it is better for you to claim 52 cents an hour or 80 an hour,” I told him.

“We generally find that a total claim is higher by claiming the 52-cents rate plus the additional items, rather than claiming 80-cents rate. If you don’t have good records or you don’t want to keep records, then you’re better off claiming the 80-cents rate.”

Tran wanted to know what records he needed to keep.

I told him he needed a diary of the hours spent working at home for one month.

“This is then extrapolated over the year, remembering that you only work for 46 weeks a year after allowing for annual leave and public holidays,” I said.

Tran said he had a room set aside as an office.

“That does give you some advantages,” I said, “as you can also claim depreciation on the furniture that you use in your office plus your technology costs.

“If you are running a business from home you can also use the occupancy expenses method. You can claim a percentage of your rent, or mortgage interest plus rates plus insurance.

“If you choose this method you have to calculate the percentage that you use for your home office. The usual way is to calculate the percentage of the floor area that the office occupies. In most houses, one bedroom is about 10 per cent of the floor area.

“Also, when you’re calculating the floor area if there are decks under the roofline they are included as can be the garage if it is used for your business. So the percentage can often be quite small.

“You also need to keep a diary of business use. So it is quite a lot of record keeping. But the sting in the tail, if you own your home, is capital gains tax.

“The law actually says that if you have an office at home whether you claim it or not you will need to pay some capital gains tax on sale if you sell the house for a profit.”

Tran said: “You’re right, Gail; like you say, everything in tax is not quite as simple as it seems. I had no idea it was so complex to claim a home office.”

If you want information on home office claims, business or tax issues, please contact the friendly team at Gail Freeman and Co on 6295 2844 or visit gailfreeman.com.au

Disclaimer

This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser.