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DISCLAIMER: the information contained in this tax tip are general comments only and do not constitute or convey advice perse.  Individuals should seek their own independent advice from a qualified advisor to ascertain how the taxation law applies in their individual circumstance. The information contained is given in good faith and is believed to be accurate.  However, neither Childcare Accounting & Financial Services nor any of its employees give any warranty of reliability or accuracy nor accept any responsibility in any way including by reason of negligence for errors or omissions herein.
ELECTRICITY AND GAS
Expenditure on electricity & gas can be claimed as a tax deduction so far as it relates to your income producing activities.

There are a number of methods you can use to determine the portion of your electricity and gas expenses for which you may be able to claim a deduction. This fact sheet outlines some of these methods.

1.  Floor Area

In order to use this method you will need to have a portion of your house set aside and used almost exclusively for business purposes. The following guidelines are provided to help you determine whether or not you have an exclusive area, otherwise known as a ‘place of business.

-  The area is clearly identifiable as a place of business (for example, you may have a sign identifying your business
 
   
at the front of your house);

The area is not suitable for private or domestic purposes; and

- The area is used exclusively or almost exclusively for carrying on your day care business.

Where you meet these criteria you may work out your claim in accordance with the floor space exclusively used for your business activities (as a proportion of the floor area of your whole home). For example, if the floor area used exclusively for day care activities is 10% of the total area of your home, you could claim 10% of your electricity & gas expenses.

If you do not have an area of your house set aside exclusively for your day care activities you cannot calculate your claim using this method. Where you do have an exclusive area, you have the choice of using this method or one of the methods outlined below.
2. Bill Comparison

If you have recently commenced business, one easy way to work out your claim is to compare 2 of your electricity bills before commencing business  and 2 bills after commencing business. The difference can then be used to work out your claim percentage.
3. Claim 34 cents per hour

Instead of working out your claim percentages you can claim a deduction of 34 cents an hour based on either your timesheets or a regular pattern of usage. This rate is based on the average costs of electricity and the value of common furniture items used in home work areas.

For Example 10 hours a week for 48 weeks of the year times 34 cents = (10 x 48) x $0.34 =  $163.20 claim

If you base your claim on a regular pattern of usage you should keep a diary over a typical four week period during the year to demonstrate how you came up with the number of hours you are claiming. You can use this diary as the basis of your claim for the entire financial year (be sure you don’t include holidays). You will need to maintain a new diary each financial year.

If you use this method of claim please note that you cannot make a claim for a room when family members are present in the room where you are providing care. E.g. your lounge room or dining area.
4. Calculate Actual Expenses

A deduction may be allowable where additional heating/cooling and lighting expenses are incurred as a result of income producing activities.

The amount you are entitled to claim is the difference between what was actually paid for heating/cooling and lighting and what would have been paid had you not worked from home.

Commissioner's formula


An appropriate formula for calculating the additional expense for an appliance is:

A x B x C where

A is the cost per unit of power used
B is the average units used per hour, and
C is the total annual hours used for income producing purposes.

Own estimate

Generally, the total of any allowable deduction for the additional expense will be small. Accordingly, a bona fide estimate based on a reasonable percentage of the household annual fuel bill will be acceptable.
Conclusion

Everyone’s circumstances are unique and different. If you are unsure about which claim method you should use,  or if you require more specific information about your circumstances, please consult your accountant.
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