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People who work from home are often entitled to claim certain expenses in their tax return, but it is essential that you only claim the correct figures.  Running expenses are a claim that you can safely make, but you should be wary about making occupancy expense claims.

Occupancy Expenses

Occupancy expenses are those expenses you pay to own, rent or use your home, even if you are not carrying on a home-based business.

Occupancy expenses include:

• Rent or Mortgage Interest
• Council Rates
• Land Tax
• House Insurance Premium

If your home qualifies for a deduction for occupancy expenses and you own it, capital gains made on disposal of the home may be taxed on that portion of the home used as a ‘place of business’ for the period it is used for that purpose.

Running Expenses

Running expenses are general expenses that you can legitimately claim, and not have to bear any Capital Gains Tax costs.

Running expenses can be claimed on an actual cost basis or a fixed rate, using the latest ATO rate allowed.

Fixed rate method

You can use a fixed rate to claim your decline in value of home office furniture and costs for heating, cooling and lighting.
The fixed rate allows you to claim the above expenses at the rate of (2010-11) 34 cents for each hour that you are in your home office and are using it exclusively for work-related purposes.

Actual Costs method

You will need to retain power bills, calculate the usage of individual appliances, and calculate the decline in value of your home office furniture.  Your power bills must be calculated in accordance with actual business use, and your calculations made available for Tax Office revue if required.

The following are classed as running expenses:

• Cleaning
• Depreciation of furniture
• Depreciation of non-furniture items
• Electricity and Gas
• Leasing costs
• Repairs to office furniture and equipment
• Telephone
• Other home office running expenses

ATO Links

• Occupancy Expenses
• Running Expenses
• Home-based work essentials

 

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