The Australian Taxation Office (ATO) is making key changes with regard to the deductions claimed by taxpayers for costs incurred when working from home.
Assistant Commissioner Tim Loh explained that taxpayers can choose one of two methods to claim working-from-home deductions: either the “actual cost” or “fixed rate” method. Only the fixed rate method is changing.
The revised fixed rate method applies from 1 July 2022 and can be used when taxpayers are working out deductions for their 2022-23 income tax returns.
Loh added that these changes provide benefits for those using the revised fixed rate in 2022-23. “Items that are difficult and tedious for everyday Aussies to calculate actual work-use, like phone, internet and electricity expenses, are included in the revised rate,” Loh explained. “Assets and equipment that typically give taxpayers a bigger deduction, such as technological items and office furniture, are not included in the revised rate and need to be claimed separately. Another benefit is that you no longer need a dedicated home office to use the fixed rate method.”
Under the revised fixed rate, the cents per work hour has increased from 52 cents to 67 cents. This rate covers energy expenses (electricity and gas), phone usage (mobile and home), internet, stationery, and computer consumables. No additional deduction for any expenses covered by the rate can be claimed.
Meanwhile, the decline in value of assets used while working from home, such as computers and office furniture, repairs and maintenance of these assets, and costs associated with cleaning a dedicated home office can be claimed separately
In addition, the revised fixed rate method doesn’t require taxpayers to have a dedicated home office space to claim working-from-home expenses.
However, from 1 March 2023 taxpayers need to keep a record of all the hours worked from home for the entire income year and estimates will not be accepted by the ATO. Records of hours worked from home can be in any form like a four-week representative diary or similar document, provided they are kept as they occur, for example, timesheets, rosters, logs of time spent accessing employer or business systems, or a diary for the full year. Records must be kept for each expense taxpayers have incurred which is covered by the fixed rate per hour (for example, if taxpayers use their phone and electricity when working from home, they must keep one bill for each of these expenses).
Loh reassured taxpayers who haven’t kept records so far this income year that transitional arrangements are in place for 2022-23, saying that from 1 July 2022 to 28 February 2023 the ATO will accept a record which represents the total number of hours worked from home (for example a four-week diary). From 1 March 2023 onwards, taxpayers will need to record the total number of hours they work from home. And he urged taxpayers to bear in mind that they won’t be able to claim for things such as coffee, tea, milk and other general household items even if their employer may provide such items at work.
For those who opt to use actual cost method, no changes have been made. Taxpayers can still claim the actual work-related portion of all running expenses. This includes keeping detailed records for all the working-from-home expenses being claimed.
The ATO reminded taxpayers that if they are claiming their actual working from home expenses, they can’t claim a deduction for expenses that have already been reimbursed by their employer.
The ATO website has online tools to help taxpayers determine the decline in value of assets and equipment purchased and to keep track of expenses.
