Call Us

BDH Tax

Menu

Actual Cost Method

To use the actual cost method to claim actual expenses, you must:

  • Incur additional running expenses as a result of working from home
  • Keep records or other written evidence, which shows the amount:
    • You spend on expenses
    • You spend on depreciating assets you buy and use while working from home
    • Of work-related use for your expenses and depreciating assets.

You don’t incur additional running expenses if other members of your household (who are not working from home) are in the same room as you while you are working from home.

Using the actual costs method, you work out your deduction by calculating the actual additional expenses you incur when working from home.

This includes expenses you incur for:

Where you incur running expenses for both private and work purposes you must apportion your deduction on a fair and reasonable basis.

You can only claim the work-related portion as a deduction.

Home and mobile phone

If you receive an itemised phone or internet bill, you need to work out your work-related use over a continuous 4-week period.

You can use your work-related percentage for the 4-week period to work out your expenses for the whole income year.

For example, you can mark your work-related calls on your monthly phone bill and work out your work-related use based on the number of those phone calls compared to your total calls.

Electricity and gas

You can work out the cost of your electricity and gas (energy expenses) for heating, cooling and lighting by using the:

  • Cost per unit of power you use (your utility bill shows this information)
  • Average units you use per hour, which is the power consumption (this information may be found in the manufacturer information, the star energy rating label or by searching the internet) and is
  • Per kilowatt (kw) hour for each electrical appliance, equipment or light you use
  • Per megajoule (MJ) hour for gas heating appliances you use
  • Total annual hours used for work-related purposes by checking your record of hours worked or your diary.

Stationery and computer consumables

For stationery and computer consumables work out the cost of computer consumables and stationery by using receipts for the items you buy.

If you use the item for both private and work-related purposes, you can only claim the work-related portion of the expense.

Decline in value of depreciating assets

If the item cost $300 or less and you use it mainly for a work-related purpose, you can claim an immediate deduction for its cost in the year you buy it.

You can claim a deduction for the decline in value of depreciating assets over the effective life of the item, if it either:

  • Cost more than $300
  • Forms part of a set that together cost more than $300

You may choose to work out the decline in value of low-cost assets and low-value assets with a cost or opening adjustable value of less than $1,000 through what is called a low-value pool.

You calculate the decline in value of depreciating assets in a low-value pool using a diminishing value rate.

You can’t allocate depreciating assets that cost $300 or less to a low-value pool if they are used mainly to produce non-business income and you can claim an immediate deduction for them.

When you use a depreciating asset for both work and private purposes you need to apportion your decline in value deduction.

You can only claim the work-related portion as a deduction.

Occupancy expenses

In limited circumstances, you may also be able to claim occupancy expenses (such as mortgage interest or rent).

You can only claim occupancy expenses if you have an area of your home set aside that has the character of a ‘place of business’ and you can show all the following:

  • The nature of your income earning activities requires you to have a place of business
  • It was necessary for you to work from home because your employer doesn’t provide you with an alternative place of business (as opposed to your employer allowing you to work from another location)
  • The area of your home that you use for work is exclusively or almost exclusively used for work purposes and isn’t readily capable of being used for any other purpose.

Indicators that the area of your home you’ve set aside to work from may be a place of business include:

  • The area is clearly identifiable as a place of business
  • The area 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
  • The area is used regularly for visits of clients or customers.

You can’t claim occupancy expenses if your employer provides you with a place to work.

To claim your work from home expenses using actual costs, you must keep a record showing:

  • The number of actual hours you work from home during the entire income year – for example, a timesheet or spreadsheet, or
  • A continuous 4-week period that represents your usual pattern of working at home – for example, a diary.

You must also keep records that show:

  • The additional running expenses you incurred while working from home, such as receipts, bills and other documents
  • How you worked out the amount of your deduction.