What are Running expenses?
Running expenses are the increased costs from using your home’s facilities for your business, for example:
– the costs of using a room (such as heating, cooling and lighting)
– cleaning costs
– landline phone and internet costs
– decline in value (depreciation) of your business furniture and equipment
– costs of repairs to your business equipment.
You can claim running expenses if you run your business from home, such as in a separate study or a desk in a lounge room, even if it doesn’t have the character of a ‘place of business’.
Calculating your claim To calculate the running expenses of your home-based business, you can use one of the methods described below or any other method as long as:
– it is reasonable in your circumstances
– you exclude your normal (private) living costs
– you have records to show how you calculated the business expense.
Heating, cooling and lighting
– If you have an area set aside for your business, you can split your heating, cooling and electricity bills based on the proportion of the floor area of your home that you use for your business and proportion of the year that you used it for business.
Fixed rate method
– Alternatively, you can use a fixed rate of 52 cents an hour for each hour that you operate your business from home – based on either your actual use or pattern of use. This covers heating, cooling, lighting, cleaning, and the decline in value of furniture and furnishings (you need to work out other expenses separately). From 1 March 2020, you have the option of a temporary shortcut method. This is similar to the fixed rate but covers more of your expenses and has a higher rate of 80 cents a work hour.
Home phone and internet
– For home (landline) phones, you can claim your business calls and a portion of the line rental costs.
– For internet expenses, you can claim the proportion of time or data you used your internet for business uses.
– You can calculate the business portion of your home phone and internet using an itemised account or pattern of use.
– If you are using the 80 cent an hour shortcut method, you don’t need to calculate these amounts as they are already included in the rate.
Decline in value (depreciation) of business assets
– You don’t separately claim the depreciation of your home-based business furniture and furnishings if you claim running expenses using the fixed rate of 52 cents an hour, as this is included in this rate.
– If you are using the shortcut rate of 80 cents an hour then that covers the decline of your furniture, furnishings as well as your computer equipment or laptop.
– You can use the instant asset write-off to deduct the full cost of business assets that cost less than the threshold that applied when it was first used or installed and ready for use.
– If you use assets for both personal and business use, you can separate your business deprecation expenses from personal based on your pattern of use.
Pattern of use
You can claim some expenses based on your ‘pattern of use’, which you can work out by keeping a diary for a representative four-week period each financial year. If you can’t show a regular pattern, you need to keep detailed records.
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