One of the two choices accessible to taxpayers for deducting work from home expenditures is the Actual Cost Method. The actual cost technique is claiming the real costs you incurred for things like phone, internet, and power while working from home as opposed to the fixed cost method, which allows you to claim 67c per hour worked from home.
Do I have the authority to apply the real cost method?
The real cost method is not available to everybody who wants to deduct work done from home. To deduct home office costs in your tax return using the actual cost method, you must fulfil the following requirements:
You incurred higher expenses as a result of working from home. (For example you used your own personal Internet to work instead of the company internet while in the office).
You have kept track of your spending, including bills and receipts for purchases.
The days you worked from home during the year are documented.
You have a separate area of the house for work that is only used by you and your household. (Example: a spare room in your residence or your home office).
This is a standard deduction situation. You must have paid for the expense out of your own pocket, arrange your bills so that you are only deducting the “work-related” portion of them, and your employer cannot have reimbursed you for it.
Read our post to learn how you might be able to claim 67c per hour worked from home if you are not qualified to claim using the actual cost approach.
What can I claim using the actual cost method?
This varies from person to person, but any additional out of pocket expenses you have due to working from home can usually be claimed on your tax return. Common items include:
Electricity and gas
Phone expenses (home and mobile)
Stationery and computer consumables
Home office cleaning expenses
Depreciation on assets over $300
Assets under $300
What can’t I claim?
You can only claim items that have resulted in additional running expenses paid out of your pocket. Any item paid for or reimbursed by your employer can’t be claimed on your tax return.
Actual Cost Method Example:
Audrey works from home 3 days per week in her dedicated home office. Her employer provides her with a laptop and mobile phone for work. They also reimburse her for stationery purchases for her job. Audrey pays for electricity, internet and office furniture herself.
Therefore, Audrey can receive an apportioned amount for her electricity and internet bills as well as her office equipment. However, she cannot claim the laptop and mobile phone as her employer provides them. She also can’t claim stationery costs as her employer reimburses them.
To ensure you maximise your tax refund and don’t run into ATO trouble, it is imperative to keep accurate records of everything you claim on your tax return. To claim using the actual cost method, you must keep the following records:
Work from home records should show either:
Number of actual hours you worked from home during the financial year (spreadsheet, timesheet, time-tracking app)
Usual work pattern over a 4-week period (diary, roster).
Receipts, bills, or other documentation that proves the expenses you claim.
How do I know if the actual cost method is right for me?
There are benefits to using both the fixed rate method (67c per hour) and the actual cost method. It will depend on your personal circumstances which method is best for you.
Don’t worry though! You won’t need to work this out for yourself if you use Etax. Simply enter all of your work from home deduction information into your tax return. Then, we’ll automatically work out which deduction method gives you the biggest refund and apply that to your return.