Home Office Deductions – More Relevant Than Ever Before

Due to the effects of COVID-19, the way many people are working is changing to a home-based office environment. This allows for a few claimable deduction options for employees, that were not allowable for them whilst working in the office.

When calculating home office deductions, many people fall into the trap of claiming too high a work-related proportion for a particular type of expense.

If you set up your home office in a room that is shared or has a dual purpose (such as a living or dining room), you can only claim the expenses for the hours you had exclusive use of the area. For example, if you worked in your home office for 38 hours in a 168 hour week, and your ‘office’ was 15% of your total home size, then for an expense like electricity, the claimable portion is (electricity cost x (38/168) x 15% x number of weeks worked).

Claimable expenses include gas, electricity, council rates, home insurance, and interest on mortgage. However, there is a more limited scope of home office claims for employees working from home, compared to the self-employed.

A new cents per hour calculation became effective from March 1, 2020. The fixed rate for home office claims has risen to 80 cents per hour worked, which is an alternative calculation to the item by item claim. You can only use this method of claim or the other.