Working from home? What to keep for your tax return
Say you work in the city three days a week and from home in Campbelltown on Thursdays and Fridays. In June, it’s tempting to count the Thursdays and Fridays on your calendar and call it done. But that count includes the Friday you took off, the Thursday you went into the office and the afternoons you finished early. Getting the records right now takes less time than trying to reconstruct them at tax time.
This guide is for employees. If you run a business from home, speak to your accountant about which rules apply to you.
Start with what you actually paid for
Working from home on its own doesn’t create a deduction. You need to be doing your job from home, have additional running expenses because of that work, and have records to support the claim. If your employer supplies the laptop, there’s no laptop purchase for you to claim. If you buy a monitor and your employer reimburses the cost in full, leave that cost out too. You may still have other eligible costs you paid yourself.
Start a folder for the income year. Save bills and receipts as you get them, and note what each expense was for. A bank entry that only says “$249” won’t tell you whether you bought a monitor, a chair or something unrelated to work.
Record the hours you worked, including the short days
Say you work from 8.30 am to 4.30 pm on Thursday and take a half-hour lunch break. That’s 7½ hours. On Friday you work from 9 am to 2 pm without a break before taking leave. That’s another five hours. Record 12½ hours for those two days. An appointment in the diary that just says “WFH” wouldn’t show the difference.
For the fixed rate method, keep a record of your actual home working hours across the income year. A diary, timesheet or calendar works if it shows the hours you actually worked. If you use a recurring calendar event, edit it when you swap days or finish early. Leave out time spent on breaks, on leave or at the office. The ATO’s working from home guide sets out the records for each method.
Compare the two methods using the records you have
Fixed rate. Multiply your recorded hours by the ATO rate for the income year you’re claiming. The rate covers costs such as energy, internet, phone use, stationery and printer ink. Keep evidence that you incurred the relevant expenses. For instance, if you incurred electricity and internet costs from working at home, keep a bill for each. You don’t need a separate home office to use this method.
The point that catches people out is the phone bill. If you use the fixed rate, you can’t also make a separate deduction for work-related phone use. Keep equipment receipts separately: a desk chair or monitor you paid for may qualify for a separate deduction, depending on its cost and work use. The receipt helps your accountant determine how to treat it.
Actual cost. Work out the eligible costs you actually incurred and how much relates to work. With electricity, for example, you’ll need evidence of the tariff and a reasonable way to show the power used by the equipment you ran for work. With a shared internet plan, you’ll need evidence to support the work-related share you claim. Bring both the bills and your calculation. This method needs more detail than a stack of bills or a percentage chosen at the end of the year.
Employees generally can’t claim part of their rent, mortgage interest or home insurance just because they work from home. If you’re unsure which method your records support, bring what you have and discuss it before lodging.
What to bring to your tax appointment
- A timesheet, diary or calendar showing when you actually worked from home.
- Copies of relevant electricity, internet or phone bills you paid.
- Receipts for any equipment you bought, with a note about who paid and how you use it.
- Details of anything your employer supplied or reimbursed.
- Any calculations and supporting records if you’re considering the actual cost method.
The easiest place to start is with next week’s calendar. Record the real hours as you go and save the next bill when it arrives.