Working from home nowadays has become a prevalent thing. If you work from home full-time or part-time, there are also some tax deductions that you can also claim. Understanding the exact claims on the tax returns could save a considerable amount of money. If you have the home office or carry the overtime work from your home, you are also eligible for tax deductions.
For tax purposes, ATO categories the home office expenses into two categories:
- Home office occupancy expenses
- Home office running expenses
Home office occupancy Expenses:
Occupancy expenses refer to the exact costs which are associated with utilising the home as the workplace. Additionally, the employees who operate their house as a primary workplace also can claim these occupancy expenses.
Generally, these home occupancy expenses are based on a percentage of your home utilised for your work. Some of the ordinary occupancy expenses include:
- Rent
- Mortgage interest
- Land rates
- House insurance
- Phone and internet
- Office Equipment
- Computer
Before the claiming process on the home office occupancy expenses, you have to clear the interest deductibility test given by ATO.
There are some specific traits that a workplace you are utilising requires to exhibit so as the quality for the occupancy expense claims, which include:
- The location has to be used for business and visited by the customers.
- This also should have a transparent signal for identifying this as the place of the company.
- This exact location also should not be flexible for private and domestic purposes.
Expenses of Home office running
If you are engaged in work from home on a part-time basis, you should claim only home office running expenses and not the occupancy expenses. Here we are providing some of the cost elements to claim:
- Power costs for a room
- Phone costs related to a business
- Markdown value of the office equipment
- Markdown value for the fittings and furniture
- Cleaning costs
- Cost repairs for equipment and furniture utilised for work
You can also claim the portion reflecting a share of work-related utilise of a line if you can show you are on the call or have to phone your employer, staff, clients or customers regularly when you are generally away from the workplace.
The one essential thing, which you have to keep in your mind, that with this process you cannot claim for:
- Mobile phone
- Home internet
- Office equipment
- Decline cost of personal computer
- Stationery
Also, there you can find some expenses which will also be claimed on your tax return in 2 standard methods:
- Actual spent amount
- Eighty cents per Hour
This is worth noting that you cannot make the tax deductions claims where no extra costs are given. If other people utilise the gadgets and electronics in the same room, you are also working in, you will not be eligible for home office expenses deductions.
Eighty cents per Hour:
If you want to ignore the individual clamming process, then you can also use this process. In this case, you can pay the introductory rate of eighty cents per Hour for covering the home office expenses.
Exact costs:
ON the other side, if you are claiming the exact costs of a home office, you must have the record. This also should show the precise pattern of use & the prices also will be allocated to the actual work expenses. When this is the more complicated process, you will end up with a higher tax deduction claim.
This is essential to note that the occupancy expense claims affect the principal residence exemption applied on the capital gains tax. This means you can also end up paying a capital gains tax for your house while you sell this.
Also, there are a lot of factors and considerations which affect the home office expenses. This can also be confusing, and this is best to discuss with the accurate business and accounting service tax experts to achieve the maximum deductions on the tax returns.
What is the process for claiming expenses while you work from home?
If you work from home & have the location just set aside exclusively for work activities, you can also claim both for running & occupancy expenses. Suppose you generally carry on your business or work elsewhere but perform some work at home occasionally.
The exact process we work is constantly changing, and for maximum people working from home is a new normal. This permits for a massive amount of flexibility, plus there are many methods for deducting the home office costs in tax returns.
If you work from home, some portion of home office expenses can also be claimed as the tax deduction. But if you set up your home office in the shared room or has a dual purpose, you can only reason for expenses for hours you had exclusive utilized of an area. connect for the best accounting & bookkeeping services in Sydney