Common questions on work from home deductions…

As more professionals shift to remote work, understanding the intricacies of claiming home office expenses has become increasingly important. For clients looking to optimize their tax deductions, here’s a practical guide to prove work-related phone use and navigate the complexities of occupancy expense claims.

Proving Work-Related Phone Usage

When claiming work-from-home expenses, clients have two primary methods: the fixed rate method and the actual cost method. Here’s how to approach each:

Fixed Rate Method

Under the fixed rate method, clients can claim a set rate per hour worked from home. However, it’s crucial to note that this rate encompasses all home office costs, including phone calls and data usage. Thus, if your client opts for this method, they cannot make a separate claim for phone expenses. The fixed rate per hour covers all their phone and data usage as part of the overall deduction.

Actual Cost Method

For clients choosing the actual cost method, a more detailed approach is required to determine the proportion of phone calls and data usage related to work. To accurately calculate this, clients should:

Keep a Diary: Document work-related phone calls and internet usage over a continuous 4-week period. This can be done using paper records or digital tools. The diary should detail the number of calls made or the amount of time spent online for work versus personal use.

Calculate the Work-Related Percentage: Based on the diary records, calculate the percentage of phone calls and data usage attributable to work. This percentage can then be applied to the total costs to determine the deductible amount.

Apply the Calculation for the Year: The 4-week record provides a representative sample that can be used for the entire income year, making it simpler to claim deductions consistently.

Claiming Rent and Occupancy Expenses

Can Employees Claim Rent for a Home Office?

Typically, employees working from home cannot claim rent or other occupancy expenses like insurance or mortgage interest. This restriction applies unless they have a specific area set aside exclusively as a ‘place of business.’

Limited Exceptions

If your client qualifies for claiming occupancy expenses, it’s crucial to be aware of potential Capital Gains Tax (CGT) implications. When a portion of the home is used as a place of business, it could impact the CGT exemption on their home if they sell it in the future.

For personalized advice and assistance with tax claims, don’t hesitate to contact us. We’re here to help you navigate these complexities and ensure you’re making the most of your deductions.

 

 

All information was sourced from ato.gov.au with the aid of ChatGPT