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Tax tips for employees with a home office

home office

Working from home is a way of life for many Australians. In fact three-quarters of small business employees, and not to mention the majority of freelancers, maintain an office in their home. But a proper workspace at home doesn’t come cheap.

In recent research, Regus found that the average Australian shells out $240 a month to run their home office, which includes the cost of equipment, foregoing the use of a room, lighting, heating, office supplies, cleaning and maintenance. That’s on top of the setting up costs, which for around half of small business workers, will set them back more than a third of their monthly salary.

Fortunately, it’s not all doom and gloom this financial year as employees working from home are now entitled to tax concessions. With a focus on small businesses in this year’s Federal budget, it’s important to know and understand how to make these new incentives work in your favour.

Tip 1: Have a conversation with your employer

If you’re an employee who works from home, you may be eligible for tax deductions that are unavailable to in-office employees. However, it’s important to have a conversation with your employer about what they are and are not willing to cover, including how the OH&S requirements work. From here it’s easy to work out what you can claim back yourself. By understanding what your employer is covering and what you’ll be claiming back means you wont accidently double dip – as that will get you into a lot of strife with the tax office!

Tip 2: Deduct your home office as a percentage of your home

We know that there are expenses incurred as a result of working from home, such as heating, lighting, and other utilities, but many people have difficulty knowing how to work out what’s being used for work purposes. My tip is to ensure that you have a designated space purely for work purposes so you can easily calculate the deduction amount by working out the percentage of floor space used for business purposes. For example, if the square footage of your home office equals 10 per cent, you may be eligible to claim 10 per cent of those expenses.

However, as an employee it’s important to ensure you know what can and can’t be claimed as a deduction – you can’t claim on rent if you’re working from home!

Tip 3: Don’t forget office supplies

The day-to-day items that allow you to work from home, such as the printer, ink, toner and postage are all fully tax deductible. While many employers may provide you with a work computer, be sure to claim on items that are not provided by work but are used for work purposes, such items may include iPads, tablets and computer screens. It’s important to note however that in many cases you may use these electronics for both business and leisure, in which case be careful to only expense the percentage used for work.

Tip 4: Employees can also make use of the Government’s accelerated depreciation

In the 2015 Federal Budget, the Government proposed to expand accelerated depreciation for small businesses in order to increase the instant asset write-off threshold to $20,000 (up from $1,000). This is a great tax incentive for employers, so if you’re an employee working from home, think about the things you need and don’t be shy to ask your employer for that new computer screen, smart board or office chair.

Tip 5: Track your expenses and keep your receipts

If you’re using your personal vehicle for business travel or paying for meals during work hours and your employer isn’t covering them, it’s likely you’ll qualify for a tax deduction. Be sure to keep accurate records of receipts for any expenses you want to claim as a deduction. I recommend writing down some notes on the back of the receipts. For example, if you’ve had a lunch meeting, make sure you jot down who you spoke with, some of the things that were discussed and anything else that might help to get you some of that money back.

About the Author:

Written by Paul Migliorini, CEO of Regus Australia and New Zealand