Work-related expenses are a critical aspect of working from home that many people overlook. The rise of remote work and the gig economy has made it easier for people to work from home, but it can be confusing to determine which expenses you can claim and how to claim them. In this blog, we will provide a comprehensive guide to work-related expenses for those who work from home.
When you work from home, you can incur many expenses that are directly related to your work. These expenses can include office supplies, internet bills, and even furniture. To ensure you are claiming the right expenses and not over or underestimating, here’s what you need to know.
Deductible and Non-Deductible Work-related Expenses
There are two types of work-related expenses: deductible and non-deductible.
Deductible expenses are expenses you can claim as a tax deduction on your tax return. These expenses reduce your taxable income, which can lead to lower taxes. Non-deductible expenses are expenses that cannot be claimed on your tax return.
Some common deductible work-related expenses include:
Home Office Expenses
If you work from home, you may be able to claim expenses related to your home office. This includes things like internet bills, electricity, and rent/mortgage interest.
To claim these expenses, you must have a dedicated workspace that is exclusively used for work purposes. You can use the ATO’s home office expenses calculator to calculate your eligible expenses.
Travel Expenses
If you travel for work, you may be able to claim travel expenses such as airfare, accommodation, and meals. These expenses must be directly related to your work, and you must keep records to substantiate your claim.
Car Expenses
If you use your car for work purposes, you may be able to claim car expenses such as fuel, insurance, and repairs. There are two methods of claiming car expenses: the cents-per-kilometre method and the logbook method.
The cents-per-kilometre method allows you to claim a fixed rate per kilometre for each business kilometre you travel. The logbook method requires you to keep a logbook for a continuous 12-week period to determine the work-related use of your car.
Work-related Education Expenses
If you undertake education or training related to your work, you may be able to claim the cost of the course, textbooks, and travel to and from the course. The course must have a direct connection to your current employment and not just broaden your general knowledge.
Non-Deductible Expenses
Non-deductible expenses are expenses that cannot be claimed as a tax deduction. These expenses may include:
Private Expenses
Expenses that are not related to your work are non-deductible. For example, if you buy a new laptop that you use for both work and personal use, you can only claim the portion of the cost that relates to your work.
Entertainment Expenses
Expenses related to entertaining clients or customers are non-deductible. This includes items like meals and concert tickets.
Fines and Penalties
Fines and penalties related to your work are non-deductible. For example, if you are fined for breaching a workplace health and safety regulation, you cannot claim the fine as a tax deduction.
Records to Keep
To claim work-related expenses, you must keep accurate records. This includes:
Receipts
Keep receipts for all work-related expenses. This includes items like office supplies, travel expenses, and education costs. Digital receipts are also acceptable.
Logbook
If you choose to claim car expenses using the logbook method, you must keep a logbook for a continuous 12-week period. This logbook must include details of all business trips, including the date, distance travelled, and purpose of the trip.
Diary
If you work from home and claim home office expenses, you should keep a diary to record the amount of time you spend working from home. This diary should include details of the date, hours worked, and work-related activities.
How to Claim Work-related Expenses
To claim work-related expenses, you must complete your tax return and declare the relevant expenses in the appropriate section. The ATO provides detailed instructions on how to claim work-related expenses on their website.
If you are self-employed, you must complete an additional section on your tax return to declare your business income and expenses. This includes all work-related expenses incurred during the year.
It’s essential to be accurate when claiming work-related expenses as the ATO can audit your tax return and impose penalties and interest if you have overclaimed or underdeclared your expenses.
Conclusion
Claiming work-related expenses when working from home can be a great way to reduce your taxable income and pay less tax. However, it’s essential to keep accurate records and only claim expenses that are directly related to your work. By doing so, you can avoid any penalties for overclaiming or claiming non-deductible expenses and ensure that your tax return is prepared accurately. If in doubt, seek professional advice from a qualified tax accountant.