Working from home is now a common feature within the Australian business environment. Many businesses are now offering a blend of WFH and in-office work, which means you, must be prepared within both work environments.

The 2022-2023 income rate methods have changed to adapt to these new working methods so it is important that you keep up to date so you do not miss out!

Changes to Working from Home Deductions

The Australian Taxation Office (ATO) has revised the way that taxpayers claim deductions for costs incurred when working from home. The changes now reflect contemporary WFH arrangements that may relate to you!

Taxpayers can choose one of two methods to claim working from home deductions: either the “actual cost” or “fixed rate” method. Note that 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.

Are You Eligible?

First, you must ensure that you are eligible to claim working from home expenses. To claim these expenses, you must be working from home to fulfil your employment duties. Minimal tasks, such as occasionally checking emails or taking calls are not applicable. You must incur additional expenses, as a result of working from home.

You must make sure you are keeping records of these expenses, regardless of what method you will choose. This will give you more flexibility when choosing the method that gives you the best deduction at tax time depending on your circumstance.

The changes included are:

Rate

• Starting July 1, the cents per work hour that can be claimed under the revised “fixed rate” method would be increased from 52 cents to 67 cents.

What is covered by the rate?

• The revised fixed rate of 67 cents per work hour covers:
  • energy expenses (electricity and gas), 
  • phone usage (mobile and home),
  • internet,
  • stationery, and
  • computer consumables, according to the ATO.
• “And remember, you can’t claim for things like coffee, tea, milk, and other general household items, even if your employer may provide these kinds of things for you at work,” said Tim Loh, assistant commissioner at the ATO, in a statement.

What can be claimed separately?

• “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,” said Tim Loh, assistant commissioner at the ATO, in a statement.
• These expenses include the repairs and maintenance of computers and office furniture, as well as the costs associated with cleaning a dedicated home office.
• Also claimed separately, is the decline in value of assets used while working from home, such as computers and office furniture.

Home office and record keeping

• The revised rules will be loosening in terms of home offices but will be stricter in record keeping.
• The revised fixed rate method does not require taxpayers to have a dedicated home office space to claim working from home expenses.
• From 1 July 2022 to 28 February 2023, the ATO is accepting a more relaxed record that represents the total number of hours worked from home (for example a 4-week diary).
• From 1 March 2023 onwards although, taxpayers will need to record the total number of hours they work from home as they occur. This can be provided in any form, for example, timesheets, rosters, and 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).

Actual cost method

• The actual cost method has not 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 cannot claim a deduction for expenses, which have already been reimbursed by their employer.

More information

• No matter which method is used, if taxpayers purchase assets and equipment for work and it costs more than $300, they cannot 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 work out the decline in value of assets and equipment purchased. There is the myDeductions tool in the ATO app, which 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.
• More information about working from home, including example calculations, is available at ato.gov.au/home

Important Note: These articles have been prepared for general circulation and are circulated for general informational purposes only; these articles should not be regarded as business or investment advice. The articles represent the views of the writers and are subject to change without notice. Additionally, while every care has been taken in the preparation of the articles no representation or warranty as to accuracy or completeness of any statement is given. An individual or organisation should, before any business or investment decision is made, consider the appropriateness of the information in this document, and seek professional advice, having regard to objectives, situation and needs. This document is solely for the use of the party to whom it is provided.