Topics on work-related expense claims (9)

Home office running expenses include appropriately apportioned heating, cooling and lighting expenses, depreciation and the cost of repairs for office equipment including computers and furnishing and cleaning costs. In this case, the taxpayer purported to claim electricity and gas costs in the 2014, 2015- and 2016-income years.

Due to the lack of substantiation in the form of a representative four-week diary and appropriate receipts of expenses, the Tribunal held the taxpayer was not entitled to claim a deduction for home office running costs.

TAX TIP – Home office running expenses

Employee taxpayers legitimately working from home from a dedicated work area can claim home office running expenses, at least to the extent that they are incurred as a result of working from home. A home office does not have to be the employee’s sole base of operations (as it would for any home office occupancy expenses to be claimed).

Taxpayers may calculate their actual home office running expenses, which involves apportioning costs based on the hours worked from home based on a representative four- week diary that demonstrates a usual pattern of working from home. Alternatively, they can claim a fixed rate per hour, which is currently 52 cents per hour.

Taxpayers relying on the 52 cents fixed rate method for energy costs and the decline in value of furniture must either keep records of all actual hours spent working at home for the year or, again, keep a diary for a representative four-week period to show their usual pattern of working from home. Additionally, if using the fixed rate method, separate claims will need to be made for phone and internet expenses, computer consumables and stationery and the decline in value on computers and other equipment. Refer to PS LA 2001/6.

The Tribunal also held the mobile telephone costs claimed by Mr Reid as other work-related expenses were not incurred in the course of his employment with Amcom, particularly on the basis that he was provided with a mobile telephone by his employer and reimbursed for any related expenses. It was accepted that he would have incurred some expense for the use of his home internet for employment related purposes, however, he had not provided sufficient substantiation to claim the purported expense.

TAX TIP – Substantiation for telephone and internet costs

Taxpayers are of course able to claim a deduction for work-related phone and internet expenses they have paid for (and not been reimbursed), if they have the records to substantiate their claims (e.g., a representative diary and receipts).

For these purposes, the ATO accepts two methods of calculating phone expenses, being to:

• claim up to $50 with limited documentation where work use is incidental (based on 25 cents for landline calls, 75 cents for mobile calls and 10 cents per text message); or
• calculate actual expenses (supported by an annual four-week representative diary).

The ATO also advises that evidence that a taxpayer’s employer expects them to work at home or make work-related calls from home will help demonstrate an entitlement to a deduction.

Refer to the ATO fact sheet ‘Claiming mobile phone, internet and home phone expenses’ which also details what substantiation the ATO requires for both itemised and bundled or non- itemised plans.

While it was acknowledged by the Tribunal that such expenses may have been useful to Mr Reid for the purpose of his employment, again the taxpayer’s deductions were denied as a result of his inability to provide receipts or any other evidence of producing assessable income.    

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