Home-based work expenses

The Australian Tax Office allows Australians who work at or from their home to claim a deduction for the additional expenses they incur from running their business.

Generally speaking, the deductible expenses that can be claimed are divided into two categories; occupancy expenses and running expenses.

Occupancy expenses: relate to ‘the place of business’, i.e. where part of an individual’s home is used solely for income producing activities. Examples of occupancy expenses include:

• mortgage interest

• rental costs

• insurance

• security

To be eligible to claim a deduction for an occupancy expense, the area of the home used for business activities must have the ‘character of a place of business’. The ATO has stated that the following shows an area of a home is ‘a place of business’ where:

• the area is clearly identifiable as a place of business

• the area is not suitable for private or domestic use

• the area is used exclusively for carrying on a business

• the area is used regularly for visiting customers

Running expenses: are costs that relate to the use of facilities in the home to run the business, such as:

• the cost of electricity and gas to heat, cool or light up a room

• business phone costs

• the decline in value of plant and equipment, such as chairs, bookcases and computers

• the decline in value of furniture and furnishings, such as curtains and carpets

• the cost of repairs to furniture and furnishings

• cleaning costs

Individuals can only claim a tax deduction for the amount of running expenses’ usage from the business, not general household expenses.