ATO's Latest Guidelines
In recent years, remote work and home offices have become increasingly prevalent. Consequently, in response to these shifts, the Australian Taxation Office (ATO) has introduced new guidelines for claiming home office expenses. In this informative article, we will navigate you through the latest changes, offering actionable tips on how to optimize your home office expenses while strictly adhering to the ATO regulations
Understanding the ATO's Definition of a Home Office:
To make the most of your home office deductions, it is crucial to understand the ATO's definition. According to the ATO, a home office is a designated area in your home used exclusively for work-related activities. It should be a space where you regularly perform your duties, and it must not have any personal or recreational use.
To claim home office expenses, certain costs must meet the ATO's criteria. These eligible expenses may include:
a. Utilities: You can claim a portion of your electricity and gas bills proportional to your home office's size and usage for work purposes.
b. Internet and Phone: If you use the Internet and phone services for work-related tasks, you can claim the proportionate costs.
c. Office Supplies: Expenses for stationery, ink cartridges, paper, and other office supplies directly used for work can be claimed.
d. Depreciation of Equipment: If you use personal assets like computers, printers, and furniture for work, you can claim depreciation expenses based on their business use percentage.
What does portion mean according to the size of the room you use for your home office? If your room is 16 sq metres and the total internal space of your home is 80 sq metres, then you are able to claim the above in the following format: 16/80 * Expenses.
To substantiate your claims, maintaining accurate records is crucial. The ATO requires you to keep records of your home office expenses, such as receipts, invoices, and utility bills. Keep a logbook of the hours spent working in your home office to calculate the proportionate expenses accurately.
To streamline the claiming process, the ATO has introduced a simplified method. Under this method, you can claim a flat rate of 80 cents per hour for all eligible home office expenses. This rate covers depreciation, electricity, gas, cleaning, and other costs. However, remember that this method doesn't allow separate claims for specific expenses.
Exclusive Use Requirement:
One essential aspect emphasized by the ATO is the exclusive use requirement. To claim home office expenses, your designated workspace must be used solely for work-related activities. If your workspace also serves personal purposes, you may not be eligible to claim the expenses associated with it.
For expenses that are used for both personal and work-related purposes, you can claim a proportional deduction. This includes costs like internet and phone bills, where you calculate the percentage of usage dedicated to work-related tasks.
Seek Professional Advice:
Navigating the intricacies of home office expenses can be challenging. Consulting a tax professional or accountant can help ensure compliance with ATO guidelines. They can provide personalized advice based on your specific situation and help you make the most of available deductions.
PSI (Personal Services Income)
If you earn PSI, nothing of the above is claimable.
As remote work continues to evolve, understanding the ATO's guidelines for claiming home office expenses is essential. By familiarizing yourself with the latest changes, as well as adhering to the exclusive use requirement, you will optimize your deductions while remaining compliant. Remember to keep meticulous records, explore the simplified method if applicable, and seek professional advice to make the most of your home office expenses.