Over the last few years the trend of working from home, whether it’s occasionally or full-time has become more and more common. If you ever work from home, you incur some expenses you can claim on your yearly tax return. Some of these expenses include computer or other technology costs, desk setup, phone or internet charges and your electricity and gas. Although you can claim these expenses as part of your tax return, you may not be able to claim 100% of the costs, especially for things like electricity or gas.
Under what circumstances can you claim electricity and gas on tax?
There are two situations in which the ATO will allow you to claim electricity and gas on your taxes, working from home as an employee or running a home-based business. In the first circumstance, your company may also offer to cover some of the expenses you incur for working from home. In this case, you can’t also claim them on your taxes.
If this isn’t the case, or you run a home-based business, you can claim portions of your electricity and gas, phone and internet usage and the depreciation of any items you’ve purchased for work. If you’re an employee, you won’t be able to claim rent or home loan interest or any items your employer supplies, including computers, phones and office furniture.
How much gas and electricity can I claim on tax?
If you work from home and don’t receive any compensation from your employer, you could claim deductions for gas and electricity used for heating, cooling and lighting. In fact, you can also claim deductions against expenses incurred for landline telephone bills, internet charges and depreciation of assets.
Working out how much gas and electricity you can claim on tax will depend on which category of worker you fall into. There are two categories: employees working for a company from home or business owners who use their home as their base or office.
For employees, there are three different methods for working out electricity and gas expenses for employees who work from home:
- Actual cost method: The actual real additional expenses on electricity and gas are worked out. You can only use this if you have a particular room reserved exclusively for work.
- Fixed-rate method: If you have a dedicated work area at home, you can claim your electricity and gas expenses in your tax at a fixed rate. This can be calculated by multiplying the number of hours you’ve used working in this area by a fixed rate of 52 cents/hour.
- Shortcut method: This is a special provision for COVID-19. This method is available temporarily until 30 June 2021. You don’t necessarily need a dedicated work area to qualify for this. The expense figure is worked out by multiplying the number of hours worked by a fixed rate of 80 cents/hour.
To claim your expenses via these methods, you’ll need to keep records such as timesheets that show you working from home. The ATO will likely ask for this when filing your return.
The other people who can claim running costs such as electricity and gas on their taxes are small business owners. These can include:
- Owners of small businesses or sole traders who operate from home
- Tradesmen and craftsmen who have their workshop at home or don’t have another office area
- Doctors and dentists etc., who have their consulting quarters and/or surgery set up at home
If you have a room exclusively or almost exclusively for work, you can claim a deduction for electricity and gas used as a percentage of your property. You can work this out based on the size of the room and the ratio it makes up of your property.
When making a claim on your taxes for electricity or gas used for the home-based business, you need to calculate your deductions based on your business structure. There will be different calculations for a sole trader versus if you’re in a partnership.
On the other hand, if you only work from home part-time and your home is not your primary work location, you can still claim deductions for electricity and gas expenses, but like employees who work for a company, you’d need to keep records of how much you work from home.