Home Office Records You Need To Keep

If your employees work from home, they may be entitled to claim a portion of their home office expenses as deductions against their taxable income. However, they need to be careful not to over-claim — especially this year.

Diary picture from Shutterstock

As we noted earlier in the week, the ATO has said it will be carefully examining any work-related expenses claims, particularly in the areas of overnight travel, transporting bulky tools and equipment, and work-related usage of computers and phones at home. While work-related expenses aren’t individually categorised on a personal tax return, any figure that’s unusually high relative to other people in the same profession is likely to trigger an audit.

The main area where people go wrong is in claiming the entirety of the cost of a computer or Internet connection or other home office-related expense, rather than just the proportion related to work use. The ATO offers up an example:

A teacher claimed for over 3,000 hours of work-related use of their home office at 34 cents per hour without evidence to support their claim – approximately eight hours every day using their home office for work purposes. No evidence was provided to support the taxpayer’s claim, so the claim of over $13,000 was disallowed in full. The taxpayer’s claim for internet access, telephone and mobile phone use was also adjusted as the taxpayer did not break down their use between private and work-related use. A diary covering the four week period of use of these items would have been acceptable but no evidence was provided to support their claim. As a result, their claim of $1,250 was disallowed. Finally, the taxpayer claimed for IT equipment and software but did not show how these items were split between private and work-related use. To support the claim the taxpayer was asked to provide estimates of work-related and private use over a four week period but they were unable to provide this information. As a result, their claim of over $9,200 was disallowed in full. In total, the taxpayer’s home office expense claims were adjusted by almost $40,000, and they were required to pay almost $17,000 in tax and penalties.

The other mistake to avoid? Claiming for expenses that have been reimbursed. That’s a no-no.

The big lesson? If your employees work at home, remind them to keep a diary of what they do. That way, they can reasonably allocate costs — and defend them if they end up being audited.

Reminder: For specific tax advice relating to your individual situation, consult a registered professional.


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