Your top five home office deductions

IT is becoming increasingly common for people to work either partly or wholly from home.

This includes employees putting in extra hours in the evening and at weekends or moving to flexible working environments where an office space isn’t necessarily provided.

“If you’ve set up a home office or converted a spare bedroom into a work space, you need to be aware of the potential tax deductions you can claim when you come to complete your 2017 tax return,” H&R Block Tasmanian manager Steve Hinton said.

Listed below are the top five deductions you could be eligible to receive.

Heating, cooling and lighting bills:

You have to heat your home office in the winter and keep it cool during the summer and you also need light to see what you’re doing.

That means that you can claim a proportion of the various household utility bills that relate to the time you spend working in your home office.

You cannot claim for periods where the home office space is being used for other purposes, nor can you claim for the element of your bills that relate to the rest of your home.

Depreciation of home office furniture and fittings:

If you fit out your home office with furniture such as desks, shelving and cupboards, then you can claim a deduction for the decline in value of that furniture to the extent that it relates to your work activity.

That’s likely to lead to a write-off of the cost over a period of several years.

Depreciation of office equipment and computers:

Similarly, if you purchase items of technology for use in your home office, you can depreciate them over their life and claim a deduction each year for the work-related element.

This might include, computers, laptops, tablets, mobile phones and printers.

Low-cost capital items:

Capital items such as furniture and computer equipment costing less than $300 can be written off in full immediately.

That could include some of the cheaper tablets and mobile phones, as well as many printers.

Other items:

Make sure you claim for the work-related proportion of other costs such as computer consumables (like printer ink), stationery, telephone and internet costs and cleaning costs.

What you can’t claim:

Many people try to claim a percentage of rent or the interest on a mortgage if they work from home using a home office.

This is not allowable unless your home is your principle place of business.

How much can you claim?

There’s no maximum amount that you can claim.

Provided that the amount you are claiming is calculated in accordance with the rules and that you have the necessary substantiation to back up your claim, you can claim whatever you’re entitled to.

Calculating a claim:

Diary method/actual running expenses

Keep a diary to work out how much of your running expenses relate to doing work in your home office or other workspace.

The diary needs to detail the time you spend in the home office compared with other users of the home office.

Keep your diary record for a representative four-week period.

The “work-use proportion” you come up with over that four-week period can then be applied to all your actual expenditure over the course of the year.

Of the two methods, this usually produces the larger deduction, but the record-keeping requirements are more stringent.

You’ll also need to work out how big your home office is compared to the rest of your house using the floor area as a guide.

This will enable you to work out the split between costs that relate to the office and costs that are domestic in nature.

ATO rate per hour method

Instead of keeping details of actual costs,you can use a fixed rate of 45-cents-per-hour for home office expenses for heating, cooling, lighting and the decline in value of furniture

You just need to keep a record of the number of hours you use the home office and multiply that by 45-cents-per-hour.

Finally, a word of warning: It is quite common for people to have insufficient documentation to support a home office claim, particularly around the proportionate split between business use and personal use, so be sure to keep records.

For more information, contact H&R Block by phoning 13 23 25 or visit hrblock.com.au.