Working from home (WFH) has become a permanent feature of the modern workplace.

It follows that, for many people, the costs of working from home will be the best way to find deductions that will maximise their tax refund.

However, because the ATO has been encouraging people to claim WFH deductions on its fixed rate method since 2022, many taxpayers may be missing out on tax refunds they are otherwise entitled to.

The starting point is to establish that you can claim WFH deductions. This can be done by reference to your employment agreement or a letter from a manager confirming that you are required to work from home and how many days a week this entails.

The pre-COVID rules concerning certain occupations that have to work from home to fulfil their duties may also apply to establish a basis for claiming WFH deductions. For example, barristers preparing briefs before a trial may have to do so from their home office. These exceptions generally involve detailed work rather than optional activities that could be performed at the workplace.

Next, you work out the actual costs of WFH and compare it to the fixed rate method, which is applicable if you incur additional running costs from working at home and you have a record of the total number of hours worked and the expenses incurred.

The fixed rate method is calculated at 67 cents per work hour and incorporates mobile phone, internet access, electricity and gas as well as stationery and computer consumables into its statutory claim. In other words, claiming the fixed rate method means you are foregoing deductions you may be able to claim with the actual cost method.

There are two main scenarios for the actual cost method:

1. Renting
2. Owning

In relation to renting, your name must appear on the lease or your spouse’s name must appear on the lease. If this is the case, you can claim a portion of the rent as long as you work from a room that is a dedicated office, study or studio. This room must not be used for personal reasons and ideally have a door.

In relation to owning, your name or your spouse’s must appear on the title of the property. But note there are capital gains tax implications for claiming a portion of your property loan interest, rates and body corporate fees for the dedicated room you use to work from home, particularly if the value of your property is forecast to increase over time.

However, maintenance costs do not carry a future CGT risk. These maintenance costs include:
– painting your home office
– repairing flooring
– repairing roofing
– replacing furniture
– installing blinds and curtains
– artworks and framing of degrees
– security systems

Renters who carry out maintenance costs at their own expense for their WFH areas may also claim tax deductions. Note that in some cases, the maintenance costs may have to be claimed over a number of years rather than the year the outlay is made.

Common to both owners and renters are claims for the costs excluded by the fixed rate method, as discussed above.

These costs have to be established by reference to your actual invoices, but the ATO has also established metrics for power consumption for a typical home office that requires lighting, computer usage and other devices.

Water consumption from mains or rainwater is not allowable and neither is food, except in very limited circumstances. However, a water cooler in your home office should be fine to claim.

Coffee machines – similar to the treatment of expensive artworks – can only be claimed if you can establish you hold meetings with colleagues, clients or stakeholders on a regular basis and even then, an apportionment for private use should be made.

Importantly, your invoices have to be in your name or the name of your spouse. Note that your spouse has to be listed on your tax return to claim all WFH deductions for which invoices are in their name only. A spouse can be a de facto.