The ATO has updated its method of claiming deductions for the expenses you incur while working from home. You can choose either to use the actual cost method or the fixed rate method from 1 July 2022 onwards based on what works best for you. In this blog, you’ll come to know what expenses you can claim using the actual cost method.
The Actual Cost Method for Claiming Costs for Working from Home
Some people might think that with the help of the actual cost method, they can get better results if they have high expenses. As the name implies, you will be able to access the actual overhead costs you incur while working from home. However, make sure you have a record of those expenses and the extent to which they are related to your work.
By using the actual cost method, you will be allowed to claim the expenses for the work-related portion of:
The decline in depreciating assets’ value – for instance, phones and computers, home office furniture and furnishings, laptops or similar devices.
Gas and electricity for heating, lighting, and cooling.
Data and internet, home and mobile phone expenses.
Stationery and computer consumables, such as paper and printer ink.
Cleaning your home office.
You need to be very careful while using this method because the ATO is looking closely to make sure these expenses are related to your work and how you make money. For instance, you can’t claim deductions for personal expenses, such as tea, coffee, and toilet paper even if you use these items when you are at work. Even you can’t claim deductions for occupancy expenses, such as mortgage interest, rent, land taxes, rates, and property insurance unless your home is a place of work or business.
What Can You Claim If You Run a Business from Home?
You can claim a deduction for the appropriate amount of occupancy expenses and operating costs if your home serves as both your primary place of business and an area designated only for business operations. On the eventual sale of the home, the Capital Gains Tax (CGT) might be payable. While your principal residence is exempt from the capital gains tax, the part of the home designated as a place of business will not be eligible for the primary residence exemption for the time it is used for this purpose, even if you are eligible, the small business CGT concessions and general CGT discount may help you lower any resulting capital gain.
You need to have a record of all expenses that you incur while working from home. These expenses need to be work-related not your personal expenses. You can claim deductions for expenses as mentioned above. For more in-depth detail, you can reach Reliable Melbourne Accountants.