Home-based business – Part 5
Actual cost method
Under the actual expenses method, you can claim the additional running costs you directly incur as a result of working from home. This may include the following expenses:
- electricity and gas for cooling, heating and lighting
- the decline in value of home office furniture (desk, chair) and furnishings,
- the decline in value of phones, computers, laptops or similar devices
- phone expenses
- internet expenses
- cleaning (if you use a dedicated area for working)
- computer consumables and stationery – such as ink
If you don’t have a dedicated work area, such as a home office, you will generally only incur minimal additional running expenses. For example, if the area you use for work is a common area of the home such as a lounge room and that area is being used by other members of your household for another purpose (such as, family members watching television) at the same time you’re working, you won’t be incurring any additional costs for lighting, heating or cooling as a result of working in that room.
To calculate the work-related portion of your actual expenses you must have records. You can: keep a record of the number of actual hours you work from home during the income year
- keep a diary for a representative four-week period to show your usual pattern of working at home
- work out the decline in value of depreciating assets and
- keep receipts showing the amount you spent on the assets
- show the percentage of the year you used those depreciating assets exclusively for work – you can claim for the portion of the decline in value that reflects your work-related use of the depreciating assets
- work out the cost of your cleaning expenses (if you have a dedicated work area) – for example, a room set up as a home office, by adding together your receipts and multiplying it by the floor area of your dedicated work area (floor area of the dedicated work area divided by the whole area of the house as a percentage) – your claim should be apportioned for any
- private use of your home office
- use of the home office by other family members
- work out the cost of your heating, cooling and lighting by working out the following
- the cost per unit of power used – refer to your utility bill for this information
- the average units used per hour – this is the power consumption per kilowatt hour for each appliance, equipment or light used
- the total annual hours used for work-related purposes – refer to your record of hours worked or your diary for this information.
- work out the cost of your phone or internet plan expenses – where you receive an itemised bill, you need to determine your percentage of work use over a four-week representative period.
- work out the cost of computer consumables and stationery by keeping receipts for the items purchased
You must take into account other members of your household when you work out your expenses. If a member of your household is using the same area of the house or the same service when you’re working, you must apportion your expenses accordingly.
To claim a deduction for an asset that cost $300 or more, you need to calculate the decline in value for both the period you:
- owned the assets during the income year
- used the assets for work-related purposes.