Home office tax deduction guide 2023

As the way we work continues to evolve, more Australians are setting up a home office. If you're one of them, you may be able to claim a deduction for some of the expenses you incur. Whether you're a freelancer, a small business owner, or an employee who occasionally works from home, understanding home office tax deductions can help you maximise your financial benefits.

Determine your eligibility for home office deductions

Before you start claiming home office tax deductions, you’ll need to determine your eligibility. 

Types of deductible expenses

Once you've established your eligibility, you need to determine which expenses you can claim as deductions. There are two main types of deductible expenses: running and occupancy expenses. To claim, you must be able to prove the following.

You incur expenses related to running your home office

This includes costs such as:

• electricity or gas for heating or cooling and light
• home and mobile internet or data expenses
• mobile and home expenses
• stationary and office supplies
• deprecitation of home office equipment.

What are running expenses?

These are expenses that you incur while using your home office. Some common running expenses include the following.

Electricity or gas for heating or cooling

Keep a record of your electricity or gas bills and calculate the portion used for your home office.

Internet and phone bills

You can claim a portion of your internet and phone bills based on the percentage of business use.

What are occupancy expenses?

It important to note that occupancy expenses are only eligible if:

• it is necessary for you to work from home, and
• your employer has not offered you an alternative place to work, such as an office, and
• if you have a dedicated home office space in which you work, such as a study.

Examples of occupancy expenses include the following.

Rent

If you're renting your home, you can claim a portion of your rent as a deduction.

Mortgage interest

If you own your home and have a mortgage, you can claim the interest portion related to your home office.

Property/land taxes

You can also claim a portion of your property taxes based on the size of your home office.

Calculating your home office expenses

Once you've determined which expenses you can claim as deductions, you need to calculate how much you can claim. There are two methods you can use to calculate your home office expenses.

Calculating running expenses

Actual cost method

The actual cost method allows you to claim a deduction for the actual running costs you incur while using your home office. To use this method, you need to keep detailed records of your expenses.

Fixed-rate method

Alternatively, you can use the ATO's fixed-rate method, which simplifies the calculation by allowing you to claim a set rate per hour for running expenses.

Helpful ways to record running expenses

Keep a logbook

Maintain a logbook to record the time you spend in your home office for work purposes. This will help you determine the percentage of running expenses you can claim.

Keep receipts and invoices

Retain all relevant receipts and invoices for running expenses, such as electricity bills, internet bills, and cleaning services.

Calculating occupancy expenses

Occupancy expenses method

The occupancy expenses method allows you to claim a deduction for a portion of your occupancy expenses based on the size of your home office. This method is simpler than the running expenses method, but you need to meet the criteria to use it. You can learn more about what qualifies as occupancy expenses on the ATO's website.

Record keeping for home office deductions

To claim a home office tax deduction, you need to keep records of your expenses. Here's what you need to know about record keeping.

Supporting documentation

You need to keep supporting documentation for all of your home office expenses. This can include receipts, invoices, and bank statements.

Organising and storing records

It's important to keep your records organised and stored securely. This can help you avoid problems if the ATO audits your tax return.

Common mistakes to avoid

There are some common mistakes that people make when claiming home office tax deductions. Here are two of the most important ones to avoid.

Incorrectly calculating expenses

Calculating your home office expenses can be complicated. It's important to get it right to avoid any issues with the ATO. To help you with your calculations, try using the ATO's home office expenses calculator.

Don't forget about insurance

As many of us are working from home these days, it may be time to consider checking that your home office equipment is insured in the case of damage or theft. That’s where Suncorp Insurance comes in!

Suncorp Home and Contents Insurance can cover home office equipment and more, including that new monitor and fancy standing desk. For renters who don’t need to worry about covering the house, Suncorp Contents Insurance may be worth considering! For full details of what’s covered and any exclusions, check out the relevant Product Disclosure Statement.

Explore Home and Contents Insurance

Read more:

• Three easy ways to create a home office in an office-less home
• 5 ways to save on home and contents insurance
• Home security tips

Consult the Australian Taxation Office or your registered tax advisor to understand if the information is applicable to you or how they apply to your personal circumstances.

Insurance is issued by AAI Limited ABN 48 005 297 807 trading as Suncorp Insurance. Read the Product Disclosure Statement before buying this insurance. The Target Market Determination is also available. This advice has been prepared without taking into account your particular objectives, financial situations or needs, so you should consider whether it is appropriate for you before acting on it.