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Actual Cost Method Deductions – When working from home, you can claim various deductions under the actual cost method. These deductions typically relate to expenses incurred due to working from your home office. 

Here are common deductions that can be claimed:

Common Deductions

  • Internet and Phone: Expenses for internet and phone services used for work purposes. If you use the same internet or phone for both personal and business use, only the business portion is deductible.
  • Office Supplies: Items such as paper, pens, printer ink, and other supplies used exclusively for work purposes.
  • Office Furniture and Equipment: The cost of furniture and equipment, such as desks, chairs, computers, laptops, and printers. These can be depreciated over time if the total cost is > $300.

Deductions Requiring a Dedicated Home Office

  • Utilities: A portion of your home’s utilities, including electricity and gas expenses for heating, cooling, and lighting.
  • Cleaning Services: The cost of cleaning services for the portion of your home used as an office.

Limited Occupancy Expense Deductions

Occupancy expense deductions can be claimed only in very limited circumstances. 

Note that if the home is your primary place of residence and you elect to claim the following expenses, there may be Capital Gains Tax implications when the property is sold:

  1. Mortgage Interest
  2. Rent
  3. Council Rates
  4. Water Rates
  5. House Insurance Premiums
  6. Land Taxes

Requirements to Claim Deductions

Internet & Phone, Office Supplies, and Office Furniture & Equipment:

  • Invoices of the expenses
  • Substantiation that the purchases are used for work-related purposes

Utilities:

  • Dedicated home office
  • Diary to keep record of the number of hours worked from home
  • Utility bill invoices indicating the cost per kilowatt of electricity
  • Efficiency rating of the utilities in the home office

Formula: WFH Hours * Cost per KW of electricity * Efficiency rating of each utility appliance = Utility deduction claimable

Cleaning:

  • Dedicated home office
  • Home cleaning invoices
  • Square meterage of the home office (obtained through a house floor plan)
  • Square meterage of the entire home (obtained through a house floor plan)

Formula: Total cleaning expense * (Square meterage of home office / Square meterage of entire home) = Cleaning deduction claimable

Occupancy Expenses (Mortgage Interest, Rent, Council & Water Rates, Home Insurance, and Land Taxes):

  • A business must be operated from your home, or your employer doesn’t provide you with an alternative place of work, and it is necessary to work from home
  • Home office where it is a clearly identifiable place of business/work
  • Home office isn’t readily capable of being used for private or domestic purposes
  • The area is exclusively or almost exclusively used for carrying on a business
  • Home office is regularly used for customer or client visits
  • Occupancy expense invoices
  • Square meterage of the home office (obtained through a house floor plan)
  • Square meterage of the entire home (obtained through a house floor plan)

Formula: Total occupancy expenses * (Square meterage of home office / Square meterage of entire home) = Occupancy deduction claimable

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