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Working from home deductions

Those who produce some form of assessable income at home or incur expenses from using that home as a workplace can claim for expenses and tax deductions.

Individuals can claim deductions for their home if it is used for income earning activities but isn’t a place of business, or if it is being used as the main place of business. The tax implications vary depending on which of these circumstances applies to an individual. Expenses individuals can claim generally fall into the following categories:

Depreciation on equipment: Deductions can be made for depreciating items like electrical tools and devices, desks, computers or chairs. Those who use the depreciating asset solely for business purposes can claim a full deduction for the decline in value. If individuals also qualify as a “small business entity” (make less than $2 million a year turnover), they can immediately write off most depreciating assets that cost less than $1,000. Using the depreciating asset for non-business purposes means individuals must reduce the deduction for decline in value by an amount that reflects the non-business use.

Running expenses: Running expenses are viewed as costs from using facilities in the home to help run the business or home office. These include electricity, gas, phone bills and perhaps even cleaning costs. A way of working out how much of these running expenses are used to run the business could be to use your floor to measure what was used e.g. if the floor area of your home office makes up 10% of the total area of your home, you can claim 10% of heating costs.

Occupancy expenses: Occupancy expenses can only be claimed by those who use their home as a place of business, not just work there from time to time. These individuals must have an area of their home dedicated exclusively to business purposes only. Occupancy expenses are expenses paid to own, rent or use this area. They include rent or mortgage interest, council rates, land taxes and house insurance premiums.

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