Tax Tip Tuesday: Home Office Expenses

A taxpayer who carries on a business from home or is required to carry out part of their employment duties at home may be entitled to claim deductions for home office expenses.

The ATO will generally not allow a taxpayer to claim for expenses associated with their home office unless their employer considers it necessary for them to work from home and the following criteria are all satisfied:

  • It is normal practice in the employee’s industry to perform some work duties from home;
  • It is part of their current income earning activities; and
  • It is a condition of the staff member’s employment, although not necessarily evidenced/documented in writing.

The two broad categories of deductions relating to home office expenses that may be allowed to a taxpayer are running expenses and occupancy expenses.

The ATO allows an alternative method for calculating running expenses.

Taxpayers wishing to make a claim for the additional expenses incurred in using a room in their home for income-producing purposes are able to use a standard rate of 45 cents per hour (in the 2015 tax year).

If this method is chosen, taxpayers will need to keep a diary recording the usage of the home office for a period being not less than four weeks.

The rate has increased from the previous year of 34c per hour to 45c.