As 30 June is almost here it is time to get your information ready for your tax return. The ATO is constantly improving their systems so it is as important as ever that you are only claiming what you are entitled to.
What Am I Entitled to Claim?
To claim a work-related deduction, it needs to meet three criteria:
- You must have spent the money yourself
- It must be directly related to earning income
- You must have a record to prove it
If your employer reimburses you for expenses incurred, then the expense is not deductible in your own personal return.
If the expense incurred related to both work and private use, then only the work-related portion of the expense is allowed as a deduction.
When reporting your deductions, ensure you advise the total expense incurred and the business use portion it relates to, e.g. ‘Mobile phone at $100 a month, 50% business use’. This means only $600 will be an allowed deduction, providing you calculated the business use percentage reasonably.
Can I Claim Deductions for Working from Home?
If you work from home then various running costs, such as electricity, gas, internet, decline in value of plant and equipment or furniture and fittings such as computers, chairs, carpets, costs of repairs and maintenance and cleaning are allowed as deductions. Again, you will need to calculate the business use percentage.
How Do I Calculate the Business Use Percentage on Home Office Claims?
A common method is calculating based off the floor area. If the room used for the home office is 20% of the total area of your home, then up to 20% of your running costs can be claimed.
If no specific room is used, you can use your own method which must meet two conditions:
- It is considered a reasonable claim
- You have shown to exclude the private portion associated with your expenses
Other Acceptable Methods
Keeping a diary for a 4-week period each financial year to work out a pattern of use for your home work area. If no pattern is established, you must keep a diary record for every time you use the area and for what purpose.
You can claim 45 cents per hour instead of calculating the actual expense incurred. This method allows you to claim for certain running costs including heating, cooling, lighting and furniture depreciation. This means you will need to separately calculate other home office expenses such as phone, internet and decline in value on computer equipment.
For phone expenses, if a landline is used exclusively for business, then you can claim a deduction for all business calls and part of the rental costs. This does not include the installation costs of the landline. If a phone is used for both business and private calls, you must calculate the usage by:
Number of business calls made and received / total number of calls made and received.