Home-based work has become a standard aspect of many Melbourne IT roles. The tax rules, however, have changed since those COVID-era arrangements. Workers at home or in a hybrid home-office arrangement must keep records and know what they can really claim against tax.
Currently under the Australian Taxation Office (ATO) rules eligible employees can calculate working-from-home deductions by using either the fixed rate method or actual cost method.
What Changed After COVID?
Temporary rules during the pandemic made it simpler for staff members to determine particular home office costs. Those arrangements have since ended.
And employees must meet certain criteria. Working from home does not mean you can deduct all your household expenses.
This distinction is important for IT professionals in Melbourne. Your deductions may vary for everyone, if you are a software developer and work from home two days of the week while another person works remotely all week.
The Fixed Rate Method
The fixed ATO rate was 70 cents an hour worked from home in the 2024-25 income year. It pays for some of the ongoing operating expenses like electricity, internet, phone usage, stationery, and computer consumables.
This method does not require a separate home-office. But you need to know all of your real WFH hours for the whole income year. An estimate is not enough.
The fixed rate does not apply to depreciation on depreciation assets, such as some computers or office furniture that may be claimed separately if the requirements are met.
What About the Actual Cost Method?
With the actual cost method, you determine the percentage of your actual expenses that were related to work.
This can include energy, internet, and other running costs where applicable. But you require documents that support the costs, works, and basis for estimating both percentages.
This approach may involve additional paperwork, but could work for some employees with higher actual deductible non-reimbursed costs.
Keeping Records: What Do IT Workers Need to Keep
This can be more complicated if you’re using expensive IT kit, or have a designated workspace at home, as you will need to apportion how much is for working and how much isn’t. Tax accountants in Carrum Downs will have experts guide you through reviewing eligible expenses and ensuring that your records substantiate the deduction being claimed.
Keep:
- Timesheets or a work diary
- Electricity and internet bills
- Receipts for eligible equipment
- Records showing work-related use
- Employer reimbursement records
Tax accountants in Carrum Downs can go over your records in relation to how the rule applies if you are unsure how it affects you, and explain the methods of deduction available.
What Cannot Be Claimed?
Ordinary costs of living to work at home are not deductible. The ATO notes that the exclusionary general category includes general household food and drink, children education expenditure, as well as any expenses paid for or reimbursed by an employer.
Similarly, you cannot just claim the total cost for a computer, a phone, or an internet connection even if there is both private use (private office) and professional work. The part relevant to work must be computed in accordance with the rules.
Caution is Your Best Friend for Remote & Hybrid Workers
Hybrid workers also need to keep track of the days that they actually work from home. Working-from-home hours do not include office days.
If you have a complex situation, tax accountants in Dandenong can assist with understanding what expenses may be tax-deductible and how to keep the supporting records.
Final Thoughts
Regardless of the work-from-home arrangements brought by a post-COVID world, deductibles for those who performed work from home in Australia are still accessible to an eligible employee. The trick is the method of calculation and also having a solid foundation to keep proper accounting records.
Your job situation may also change year to year especially as remote-work policies evolve for your employer. Consulting with tax accountants in Dandenong can assist you to verify if your deduction method is still suitable for the financial year.