Home Office Expenses

16. August 2016

We often get asked about obtaining a tax deduction for using your home as an office.

You can only claim occupancy expenses: (such as rates, mortgage interest, rent and insurance) where your home office is considered to be a place of business.

If, however – and this is where the bulk of taxpayers queries come from- your employer has
an office in the city where you reside, your home office will not be a place of business, even
if your work requires you to work outside normal business hours.

See Taxation Ruling TR 93/30External Link – Income tax: deductions for home office expenses for more information.

You can however claim the additional running expenses for your home office by

  • apportioning the actual costs incurred or
  • using a fixed rate of 45 cents an hour.

You need to keep a record of the time spent in your home office on employment activities. The record should cover a representative period and a reasonable time (generally four weeks). This was previously set at 34c an hour, but has now been changed to 45c an hour.

See the ATO practice statement here PS LA 2001/6External Link – Home office expenses; diaries of use and calculation of home office expenses for more information.

Example from PSLA 2001/6

George is an outstanding employee accountant working for a city-based firm that expects him to complete a specified amount of work each day. In order to achieve this, George has elected to take some of his work home at night so that he can spend more time with his family. George spends an average of two hours per night Monday to Friday working in his home office.

George has two options for calculating his running expenses, both of which require him to keep a log to apportion between income producing activities and private/domestic use. George decides to use the standard rate of 45 cents per hour instead of using electricity authority hourly costs per appliance and calculating decline in value for items of plant. This is a simpler and quicker calculation for his expenses.

Item: Running Expenses

Calculation: 45c per hour for ten hours per week for 48 weeks

Deduction Amount – This year: $216.00

Deduction Amount – Future Years (assuming similar use): $216.00