2022 Working From Home Tax Return Guide
While working from home has long been a highly sought after perk in the workplace, the practice has become far more commonplace in recent years. In 2020, companies were quick to adopt strategies allowing employees to work from home due to covid. Two years later, many of these employees are yet to return to the office.
If you're one of Australia's hybrid or work from home workers you may be wondering which home expenses you can claim at tax time. While a registered tax agent can give you personalised advice based on your specific financial situation, there are some general do's and don't's for claiming working from home expenses in 2022.
What can I claim on my tax return if I work from home?
If you work from home, there are some expenses you can claim in your tax return. It's important to understand which deductions are legitimate, and which could land you in hot water in the event of an audit.
Can I claim internet costs if I work from home?
You can claim a portion of your phone and internet expenses if you work from home. You must be able to prove that you need the relevant phone and internet services to perform your work duties, and your employer must not be already reimbursing you for these services. You will most likely not be able to claim the full cost of these bills, but you will be able to claim a deduction for the work related portion of them.
Can I claim home office furniture if I work from home?
Quality home office furniture that is fit for purpose is essential to creating a healthy and safe work from home environment. Spending long hours at a desk requires being mindful of eye strain, correct monitor height and whether your chair is supportive. You may require new home office equipment if the furniture or equipment you have on hand is not appropriate. Any new home office furniture required for your work duties is claimable on tax. You may also be able to claim the decline in value associated with your home office furniture.
Can I claim my electric or lighting bills costs if I work from home?
Electricity expenses can be a source of stress for those who work from home frequently. Between monitors, laptops and lighting or temperature control, your bills can increase quickly. Fortunately, you can claim a portion of your home running expenses in your tax return. The amount you claim must be relative to the size of your work area and you cannot have been reimbursed by your employer already for these costs.
What else can I claim?
Essentially, anything you require to complete your work can be claimed as a tax deduction. If you need a mobile phone to make client calls, certain cables to connect your monitor or any other stationary, you can most likely claim this. If you're unsure whether something is tax deductible, seek expert tax advice as soon as possible.
What can’t you claim on your tax return if you work from home?
The tax implications of claiming home office expenses that are not legitimate can be serious. It's important to understand what kind of expenses may catch the attention of the Australian Taxation Office.
Things you can't claim on tax:
Snacks, coffee, tea and other household consumables. Although your employer may provide these in the workplace, these are not absolutely required to perform your work duties.
Any items provided to you and paid for by your employer. If you have been supplied a laptop or phone by your employer, you cannot also claim these as tax deductions.
Any costs related to your childs education including but not limited to iPads, desks or subscriptions.
Any other expenses incurred in the course of your duties which your employer reimburses you for.
Can I claim rent if I work from home?
While you cannot claim your rent in full for working from home, you may be able to claim occupancy expenses in very limited circumstances. Occupancy expenses are the costs you incur to rent, own or use your own home. These expenses could related to:
Rent
Interest on your mortgage
Land taxes
House insurance premiums
Council and water rates
Most work from home employees will not be eligible to claim occupancy expenses. To be eligible to claim occupancy expenses you must be able to demonstrate that the dedicated work space you operate from (for example, a study) is not used for any other purpose outside your employment duties, and that your employer is unable to provide you with an alternate place to work.
Claiming occupancy expenses can be complicated and may come with unexpected implications such as capital gains tax impacts in the event that you sell your home. If you are considering claiming occupancy expenses it is highly recommended you speak to a qualified tax agent before doing so.
Calculating Tax Deductions 2022:
There are three main methods available to calculate your 2022 work from home tax deductions. Whichever method you use, accurate record keeping is key to avoiding an unpleasant experience if you are chosen for an audit this tax time.
Shortcut method
In response to the unusually large number of employees working from home due to covid 19, the ATO introduced a work from home shortcut method for the 2021 and 2022 financial years. This method allowed users to claim 80 cents per hour for each hour they worked at home in order to cover all their work from home expenses. When using this method, you cannot claim other individual work from home expenses. While this method hasn't been made available for the 2023 financial year as yet, this shortcut method offer may be extended at the end of this financial year.
Fixed cost method
While similar to the 80 cents per hour shortcut method, the fixed cost method may provide a better outcome for some taxpayers. This method allows employees to claim 52 cents per hour for each hour worked from home. As an example, 38 hours per week x 48 weeks = 1,824 hours. 1,824 x 52 cents would provide a deduction outcome of $948. The advantage of the fixed 52 cents per hour method is that you can also claim other additional running expenses such as internet, mobile phone and laptops. This combination may be more favourable than the shortcut method alone.
Actual cost method
The actual cost method requires diligent record keeping throughout the year, but it may be the best way to claim tax deductions for some employees. This method allows you to claim the actual costs incurred by working from home. These expenses will be applied on a pro rata basis for the amount of business use they were required for. An example of a pro rata actual expense is if your electricity bill is $2,100 annually, and your dedicated work space (study or similar) is 10% of your house floor-plan, you can claim 10% of the $2,100 on your tax return.
Work From Home FAQ’s:
How much can I claim on my working from home tax return without receipts?
Claiming any expense without a receipt is not recommended. Claiming an unusual amount of deductions could also trigger an investigation by the ATO. Keep in mind that the ATO could conduct an audit into your tax returns at any time, and you'll need to be able to show records proving that your deductions are legitimate. Find a safe place in your home and store all your tax deduction receipts and records for a minimum of five years to avoid an unpleasant audit experience. If you're using the shortcut methods to calculate your tax deductions, we recommend you keep a diary, roster copies or timesheets to demonstrate that the hours claimed are accurate.
Can I claim home office running expenses if I live with my parents?
If you live with your parents, claiming work expenses can be a little more complicated. You can only claim a tax deduction for working from home expenses if you are the individual paying those costs to begin with. If your parents pay for heating cooling and lighting costs, you cannot claim deductions for these individually. If you live with your parents the 52 cents per hour fixed rate method or 80 cents per hour shortcut method may be the best option.
Seeking Professional Help
Whether you're using a fixed rate claim method or tallying up your actual expenses, everybody could use some assistance at tax time. Seeking out a registered tax agent such as MP Tax can make a big difference. Whether it's allowing you to claim a deduction you weren't otherwise aware of or ensuring you're not making financial errors, the experts at MP Tax can ensure that all working from home expenses are claimed correctly. The cost of having an agent manage your tax return is also tax deductible. This means that expert assistance has never been more accessible.
Now that you're armed with the basic knowledge around what you can and can't claim for your 2022 tax return working from home expenses, you can move ahead with confidence. If you work from home remember to keep diligent records of any additional running expenses you incur as a result of your duties, never claim an expense your employer pays for and save your relevant documents for at least five years. To find out how you can maximise your next tax return, seek out expert help to receive personalised advice for your specific circumstances.