Ask LH: How Much Of My Internet Bill Can I Claim On Tax?

Ask LH: How Much Of My Internet Bill Can I Claim On Tax?

Dear Lifehacker, As a telecommuter, I work from home during standard business hours. I’m aware that I can claim part of my expenditure on tax, but what portion is appropriate?

Working from home requires me to sign into a VPN during work hours. I’m generally utilising the internet for checking emails, using web portals and communicating with co-workers using other services such as Lync. The internet connection being used is my pre-existing personal plan (ADSL2+, 200GB per month).

The question is, how do I quantify my internet usage? If it is by data (downloads and uploads) then it is probably only 5 per cent (if that) of my overall usage. If it is calculated by time then it is 40 hours out of 168 hours per week (approximately 25 per cent).

I have been told to keep a diary to help in case of being audited but I still do not know what I should be basing my work usage on — time or data? Any thoughts? Thanks, Taxed Telecommuter

Working from home picture from Shutterstock

Dear TT,

So questions about tax deductions for Internet use are all the rage around Lifehacker HQ right now. As with any tax issue, if you require specific advice you should consultant an accountant or other qualified professional. However, you have identified the core issue: you need to claim a proportion of the related expense.

In this case, I’d suggest that time-based diaries are the way to go. While it’s true that what you pay is partially determined by your download allowance, it is primarily time-based: you pay monthly for a given level of service. It’s also the case that a fair proportion of any ISP bill is merely to have the service available.

The basis of calculation you have used seems fair, and indeed errs sensibly on the side of caution by including all the hours that your connection is switched on. If you had calculated based on the hours you were awake and using the Internet for non-work purposes, the proportion would be higher, but conservatism here seems wise.

While you’re not likely to attract any audit dramas by claiming just 25 per cent of your bill against your income backed by a diary of your work hours, I’d still suggest seeing a professional would be worthwhile. Since you’re working from home full-time, there are also other expenses you could potentially claim (electricity and phone usage, and a proportion of your rent if you’re renting). Under those circumstances, working through a tax professional will ensure you can legitimately claim the allowed range of deductions without going overboard, and the cost of using them may well be offset by a reduced tax bill.

One final point: I’m presuming that your employer isn’t paying for all or part of your internet bill directly. If they are, then you can’t claim that against tax (and you’ll already be better off financially).

Cheers Lifehacker

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  • As an accountant it drives me nuts how often people come in and say “90% of my phone and internet is business” and when asked why and how is that possible with 3 other people in their house they just go … “Because BUSINESS REASONS!”.

    Thank you for voicing something responsible on the internet!

    • Given most office workers spend some of their day bludging on personal email, Facebook, twitter etc on company time – AND many home businesses could easily demonstrate they are doing business at all hours – what is the problem?
      Is the question: how many cumulative hours do you spend doing work at home OR how many hours in the day have you doing some work? If the latter – easy to say 90% of the time.
      You are asking the wrong question!

  • Thanks Angus – Such a quick turnaround on my question 🙂

    My employer currently contributes nothing to my working from home running costs and my tax professional basically shrugged their shoulders when I asked them a similar question last year which resulted in me claiming nothing.

    I own my home and hadn’t thought to claim a percentage of electricity – I’ll source a better tax professional and discuss it with them further – Cheers 🙂

    • Definitely look for a better tax consultant. Having worked in a local tax business, I’ve seen some great consultants and some pretty useless ones. The great ones know exactly what can be claimed and will work hard to claim everything their clients are entitled to, whereas the crap ones just don’t care (and don’t last long).

    • Under a self assessment system you can always claim but the ATO may at a later date reject that claim. Just remember that the tax professional sometimes sits in a precarious position. To claim home Study you are required to have a 4 week register of a normal period. How many people are willing to do the documents required to ultimately claim $50. In my experience NONE

      Register needs to be done EACH YEAR
      Record hours of work use
      Record WHAT equipment is being used
      Record WHAT the electrical use that item uses per hour
      etc etc etc

      The Tax professional isnt the dick…. the requirements are

  • Having TPG Unlimited net, they don’t record how much data you download at all.. So I guess this is an easy one for me and say that it is by time %.

    • They do record it, you just have to ring up and get a copy of it via email. They don’t provide it via the online portal (which is annoying).

  • They do record it, you just have to ring up and get a copy of it via email. They don’t provide it via the online portal (which is annoying).

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