Tax Return:: Working From Home Expenses (Actual Cost Method)
Hello, this is your tax and super specialist, P&C Tax Professionals.
Continuing on from our topic last week, today, we will look at the other method you could use to calculate your working from home expenses which is, the actual cost method.
<Eligibility>
In order to use the actual cost method, you would have to:
> incur additional running expenses as a result of working from home
> keep proper records in the form of receipts or other written evidence that shows:
- the amount you have spent on the expenses
- the amount you have spent on depreciating assets you acquired and used for your home office
- the amount of work-related use for all of the expenses and depreciating assets you have purchased during the financial year.
Keep in mind that you would not be considered as incurring 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. Hence, if this is the case, you would not be able to claim any work from home expenses since you are considered to be sharing the lighting, heating, or cooling expenses with others who are not working from home.
<How to calculate it>
As the name suggests, if you are using the actual cost method to work out your working from home expenses, your WFH deduction would simply be calculated by taking into account the total amount of actual expenses you incurred in order to produce your income while working from home. Some of the expenses may include:
> Decline in value of depreciating assets that are greater than $300 in value (e.g., home office furniture, furnishings, phones and computers, laptops, or other similar devices)
> Cleaning expenses – if you have a dedicated area where you carry out your work duties
> Heating, cooling, and lighting (e.g., electricity and gas)
> Phone, data, and internet
> Computer consumables and stationery (e.g., printer ink, pens, paper, etc.)
When you are claiming for your work from home expenses, remember to apportion your work-related use and private use so that only the work-related portion of each of the expense item(s) is included.
<Record keeping for actual costs method>
When it comes to the record keeping for the actual cost method you must keep either one of the following:
> a record of the total number of actual hours you have worked from home throughout the income year OR
> a diary that contains a representative 4-week period whereby your usual pattern of working from home can be observed
In addition to that, you are also required to keep every receipt, bill, and any other documents that can serve as evidence that you have incurred additional running expenses while you were working from home.
As most of you may already be aware of, from the 2023 financial year, you will no longer be able to use the shortcut method which was only temporarily available from 1 March 2020 to 30 June 2022. This means that starting from 1 July 2022, you would either have to adopt the fixed rate method or the actual cost method.
In the meantime, if you have any further questions or enquiries on matters related to tax, please reach out to us through our official Facebook Page (P&C Tax Professionals – Australia) or by sending us an email to pnctax@naver.com.
Thank you and bye for now!