When it comes to lodging your individual tax return, it’s important to note the distinction between taxable income and assessable income
In broad terms, taxable income = assessable income – allowable deductions.
According to recent ATO data*, for the 2017-18 FY, 14.29M+ individuals claimed on average $2,576 in deductions, such as donations, work-related expenses, cost of managing tax affairs, and personal super contributions.
Furthermore, 8.95M+ individuals claimed on average $2,424 in work-related expenses, such as car, travel, clothing, and self-education, as well as other expenses, such as home office.
Interestingly, in terms of home office expenses and employee working arrangements, according to ABS data^, 24.60% of employees regularly worked from home in 2019. Compared to, 22.87% in 2017 and 21.48% in 2015.
The steady rise in employees working from home has been reported to#:
- Future-proof the workplace.
- Increase aspects of workplace gender equality.
- Improve employee productivity and wellbeing, as well as attraction and retention.
Employee’s key benefits and challenges reported are*^:
- Advantages: Flexibility, work-life balance, and no office-based distractions.
- Disadvantages: Isolation, maintenance of work-life balance, and household distractions.
- Unexpected costs: Office supplies and technology, electricity bills, and food consumption.
- Workplace health and safety issues: Home office set-up ergonomics and not taking appropriate breaks.
Given the above, from a costs perspective, we provide a general overview of work-related home office expenses below.
Understanding work-related expenses
Definition of a work-related expense
Before diving into work-related home office expenses, it’s important first to understand work-related expenses in general. A work-related expense is an expense you incurred in relation to performing your work duties.
To claim a deduction for a work-related expense, three main rules must be satisfied:
- It must be directly related to earning your income.
- You must have a record to substantiate claims, such as receipts, invoices, bank statements or calculations.
- You must have personally incurred the expense and not have been reimbursed by your employer.
If the expense was for both private and work purposes, only the work-related portion can be claimed.
General record-keeping guidelines for work-related expenses
When it comes to the record-keeping required for claiming work-related expenses, there are two thresholds:
- If the total claim for work-related expenses is ≤$300, written evidence isn’t required, however, you must be able to show how you calculated your claim.
- If the total claim for work-related expenses is >$300, written evidence is required.
Please note: The $300 doesn’t include certain claims, such as car expenses, meal allowance, award transport payments allowance and travel allowance expenses—there are specific written evidence rules regarding these claims. Also, it’s important to note that up to the first $250 of certain self-education expenses are non-deductible, however, this amount may be reduced depending on the type of expenses you have incurred.
*Australian Government, Australian Bureau of Statistics. (2020). Taxation statistics 2017–18 Individuals: Selected deductions, by deduction type, deduction claimed range and state/territory, 2017–18 income year.
^Australian Government, Australian Bureau of Statistics. (2015/17/19). 6333.0 – Characteristics of Employment, Australia, August 2015/17/19: Selected employment characteristics– By status of employment in main job.
#Australian Government, Workplace Gender Equality Agency. (2019). Flexible working is good for business: The business case.
*^McCrindle Research. (2013). Working from home: The benefits and the cost: Research summary.