Home office expenses are a major key driver in receiving a great tax refund if utilised correctly. BFS Partners explains what is up for grabs.
Do you work entirely from a home office or would you need to do some part time or over time work from home?
Many of our clients need to opentheir laptop at home to check emails or use their phone to make some work calls. However, if taking yourwork home with you is a regular occurrence for you then it will be a good idea to create a little space for you in house where you can work in peace away from the tv, kids or your partner breaking dishes in the kitchen. The benefit of this that you make claiming tax deductions for that home office space much easier for yourself and us.
“So, what are home office expenses?”
BFS Partners have heard this question on multiple occasions when discussing potential home office deductions with clients. We usually reply with “Well, home office expenses are usually broken up into two categories: home office running costs and home office occupancy costs”.
1. Running Expenses:Home office running expenses include:
- The cost of using the power of the room (Electricity costs)
- Business related telephone & internet costs
- Depreciation on office equipment (computer, printer, scanner etc.)
- Depreciation on furniture & fittings (Tables, chairs, curtains/blinds, floor boards etc)
- Cleaning costs
“How can I claim these costs?”
You can claim these expenses in two ways:
- The amount of actual expenses incurred through a pattern of use
- Or by using the ATO’s rate which is the hours worked a year by 0.45c/per hour
Patterns of use means keeping diary records noting the time that you used your home office for work is acceptable evidence for establishing a pattern of use and she should be kept for at least four weeks in a financial year.
2. Occupancy expenses:
Occupancy expenses are relevant only to those using their home as a place of business. However, if your employer does not provide you with a workspace and you can provide sufficient evidence that your home was your primary place of your work then you are able to claim the relative percentage of the occupancy expenses of your home.
Occupancy expenses can include:
- Rent
- Mortgage Interest
- Council and water Rates
- House Insurance / Strata
To be able to claim a deduction on the interest you pay on your mortgage, the area you declare as your home office/place of business must be a genuine place of business. It must meet the criteria, outline by the ATO:
- Identifiable as a place of business, e.g. you have a sign identifying your business at the front of your house.
- Not readily suitable or adaptable for private or domestic purposes
- Used regularly for visits by your clients
- Used for carrying on work operations.
Important note:
Please be aware that if you were to claim occupancy home office expenses, it will affect your ability to claim a ‘main residence exemption’ for capital gains taxpurposes. This could leave you having to pay capital gains tax on your family home if you sell it.
Before claiming any occupancy costs,we strongly recommend you contactus for further advice as this can be a little complicated depending on your individual circumstances. Drop us an email at advice@bfspartners.com.au or call us on (02) 8094 8990.