Before you start working on your tax return this year, you should be aware that the Australian Taxation Office (ATO) has refreshed the way taxpayers can claim deductions for costs incurred when working from home.
According to the ATO, the changes better reflect contemporary working from home arrangements.
There are two methods that taxpayers can choose to claim working from home deductions.
Either:
- the ‘actual cost’ or
- the ‘fixed rate’ method.
Only the fixed rate method has changed and applies from 1 July 2022 – THIS TAX YEAR.
The biggest message coming from the ATO on this issue is to make sure you are eligible to claim working from home expenses.
- You must be working from home to fulfil your employment duties, not just carrying out minimal tasks such as occasionally checking emails or taking calls.
- You must incur additional expenses as a result of working from home.
Regardless of the method you use, make sure to keep records. This will provide more flexibility at tax time to choose the method that gives you the best deductions depending on your circumstances.
Items that are difficult and tedious for you to calculate the actual ‘work use’, such as phone, internet and electricity expenses, are included in the revised rate.
What if you haven’t kept records?
There are transitional arrangements in place for 2022-23.
From 1 July 2022 to 28 February 2023, the ATO will accept a record that represents the total number of hours worked from home with evidence from a 4 week diary.
From 1 March 2023 onwards, taxpayers will need to have recorded the total number of hours they worked from home.
And just in case you didn’t know, you can’t claim for things like coffee, tea, milk and other general household items, even if your employer provided these amenities for you at work.
Nope – don’t try that one!
What’s changed?
The hourly rate. The cents per work hour have increased from 52 cents to 67 cents.
You are not required to have a dedicated home office space to claim working from home expenses.
What is covered by the rate?
The 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 if you use this method.
Deductions that can be claimed separately
- depreciation of assets used while working from home, such as computers and office furniture.
- repairs and maintenance of these assets.
- costs associated with cleaning a dedicated home office.
Record keeping
You need to have a record of all the hours worked from home for the entire income year.
The ATO won’t accept estimates, a 4 week representative diary or similar document under this method from 1 March 2023.
Records of hours worked from home can be in any form provided they are kept as they occur. Examples are 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 you have incurred covered by the fixed rate per hour. For example, if you have used your phone and electricity when working from home, you must keep one bill for each of these expenses.
Actual cost method hasn’t changed
Taxpayers can claim the actual work related portion of all running expenses.
This includes keeping detailed records for all the working from home expenses being claimed including:
- all receipts, bills and other similar documents to show taxpayers have incurred the expenses, a record of the number of hours worked from home during the income year (either the actual hours or a diary or similar document kept for a representative 4 week period to show the usual pattern of working at home).
- a record of how taxpayers have calculated the work related and private portion of their expenses (for example, a diary or similar document kept for a representative 4 week period to show the usual pattern of work related use of a depreciating asset such as a laptop).
The ATO is reminding taxpayers that if they are claiming their actual working from home expenses, they can’t claim a deduction for expenses which have already been reimbursed by their employer.
No matter the method used, if taxpayers purchase assets and equipment for work and it costs more than $300, they can’t claim the full amount immediately.
For each of these items, the deduction must be claimed over a number of years and the work portion claimed (known as decline in value or depreciation).
The ATO has online calculators to help taxpayers calculate the decline in value of assets and equipment purchased.
There is also the myDeductions tool in the ATO app that can help keep track of expenses.
Taxpayers needing assistance or advice about claiming working from home expenses can also seek the assistance of a registered tax professional.
