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Claiming deductions for working from home

Many of us have been working from home due to Covid-19 and other flexible workplace arrangements. Generally speaking home expenses that are broken up into two categories:

  • Occupancy Expenses: expenses are those you pay to own, rent or use your home. They include: mortgage interest or rent, council rates land taxes house and contents insurance premiums.

  • Running expenses: expenses relating to the use of facilities within the home. These include electricity charges for heating/cooling, lighting, cleaning costs, depreciation, leasing charges and the cost of repairs on items of furniture and furnishings in the office.

To be able to claim a deduction for occupancy expenses a taxpayer needs to show that:

  • The outgoing was incurred in gaining or producing assessable income and;

  • That working from home is not simply as a matter of mere convenience (e.g. a workplace policy, terms of employment or no provided place of business)

  • That the area subject to the claim was a dedicated work area (a separate, identifiable space that cannot be readily converted for domestic use).

Taxpayers who have a dedicated study that they have used during lockdown maybe able to claim not only running costs but also occupancy costs if they have been required to work from home because their office is not available.


Capital Gains implications

Taxpayers need to consider the Capital Gains tax implications of claiming such occupancy costs as capital gains tax generally does not apply to a person’s main residence. However when the main residence disposed of was also used for the purpose of gaining or producing assessable income during the period of ownership, for example, where an area of a home is set aside and used as a place of business, the capital gains provisions may apply.

This of course would not apply to taxpayers who are renting their home as there would be no capital gains tax exposure. ITAA 1997 118-190(2)

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