If you work from home, either as a self-employed person or as an employee, your ability to claim a deduction for the cost of running your home and paying costs such as rent (normally considered private in nature and therefore not deductible) will depend entirely on your individual circumstances.
First thing is to recognise the two categories of expense:
occupancy expenses – these relate to the costs of ownership. Includes mortgage interest, rent, rates, house insurance, and land tax
running expenses – these will fluctuate with usage. Includes electricity, gas, cleaning, and depreciation & repairs on office equipment
Now, to determine if you can claim occupancy and running expenses, or only running expenses, you will need to determine if the area of the home in question has the character of a place of business, rather than merely a private study area.
There are many factors to consider in determining the character. The following is a guide, but is by no means definitive:
the area is clearly identifiable as a place of business
the area is not readily suitable or adaptable for use for private or domestic purposes in association with the home generally
the area is used exclusively or almost exclusively for carrying on a business
the area is used regularly for visits of clients or customers
Another key issue here is that there is no alternative place of business and it was necessary to work from home in order to produce assessable income.
If you are happy that you are in fact running a business from home and there is a distinct place of business, then you should be able to claim the relevant portion of all occupancy and running expenses.
If, however, you are simply paying for a ‘home office’ or study area, then you won’t be able to claim occupancy costs. You should, however, be able to claim a portion of your running costs.
And the answer to the question on everyone’s lips is … no. Generally speaking, most employees cannot claim home rent for the home office they may occasionally work from. Reason being that employers typically provide their staff with a place to work at their place of business, and as presumably they are claiming a rent deduction for that space, you are not able to also claim a deduction (i.e. no double-dipping).
Further reading here on the ATO website. If you’d like advice around what you can and can’t claim or anything else in relation to your business, please get in touch. We’d love to help.