Claiming Internet costs | 2023 Gotax

Can I claim my Home Internet costs?

You can claim your home internet costs as a tax deduction up to the point that it represents the use you use for your work.

To make sure you don’t become unstuck, there are a few rules to abide by.  They’re simple enough and it does mean some extra paperwork and yeh we know that sucks.  Or you can use the easy way and upload Deduction Grabber to your phone.

Here is the tech speak by the Australian Taxation Office (ATO), that first determines if your expenses are tax deductible; you must meet all of the following conditions:

- You must incur the cost and use the service to perform your work duties.

- You must have a record of your expenses and use of the service.

- You must apportion your deduction between work and private use.

You can't claim:

- Your use of the home internet for private purposes, such as personal emails or streaming services.

- Expenses for home internet services where your employer or someone else supplies it,

- Your employer reimburses you the cost.

How to calculate your deduction for home internet use?

There are two methods you can use to calculate your deduction for work-related home internet use:

- Claiming incidental use ($50 or less), with basic records to show how you calculated your claim. You can claim $0.25 for each gigabyte (GB) of data you use for work¹.

- Keeping records and written evidence to work out actual expenses for work-related use. You can do this by keeping a diary for a four-week period that shows how much you use your home internet for work and private purposes. You can then apply this percentage to your annual internet bill.

For example, let's say you have a monthly internet plan that costs $80 and gives you 200 GB of data. You keep a diary for four weeks and find out that you use 20 GB of data for work and 80 GB of data for private purposes. This means that your work-related percentage is 20%. You can then claim 20% of your annual internet bill as a deduction, which is $192 ($80 x 12 x 0.2).

What records do you need to keep?

To claim a deduction for home internet costs, you need to keep records that show:

- The amount of your internet bill and how you paid it.

- How you calculated your work-related percentage or amount.

- How you used your home internet for work purposes.

You can keep receipts, invoices, bank statements, diaries, or any other documents that support your claim.

Keep all your records electronically in our handy little app Deduction Grabber.  Scan the QR code to get up and going.  And it has the diaries you need.

An example of how to save money on your home internet costs

Let's say you are a freelance graphic designer who works from home. You use your home internet to communicate with clients, upload and download files, and research online. You also use it for personal purposes, such as browsing social media and watching videos.

You have a monthly internet plan that costs $100 and gives you 250 GB of data. You keep a diary for four weeks and find out that you use 50 GB of data for work and 100 GB of data for private purposes. This means that your work-related percentage is 33%. You can then claim 33% of your annual internet bill as a deduction, which is $396 ($100 x 12 x 0.33).

By claiming this deduction, you can reduce your taxable income by $396 and save money on your tax bill. Depending on your marginal tax rate, this could mean saving up to $158.40 in tax (assuming a tax rate of 40%).

Well you should be enlightened by now and have a good understanding of how you can claim and validate your home internet costs.

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