CLAIMING DEDUCTIONS FOR WORK FROM HOME IS CHANGING AGAIN!

Now more than ever, people are working from home. The ATO has previously allowed taxpayers to claim a deduction for working from home.

Initially, two methods were used:

  1. Fixed rate method of 52 cents per hour
  2. Actual costs method

When COVID arrived, and a third method was introduced with a slightly different twist on how to claim the deduction, as explained below:

  1. Shortcut method of 80 cents per hour

The temporary Shortcut method was introduced for simplicity, allowable until 30 June 2022.

This method allows a claim of 80c per hour worked from home, covering phone and data expenses, internet expenses, the decline in value of equipment and furniture and electricity and gas for heating, cooling and lighting.

The only requirement was a record representative of time spent working from home.

  • Fixed rate method of 52 cents per hour

The Fixed rate method allows a claim of 52c per hour worked from home, covering the decline in value of home office furniture and furnishings (eg. desk, chairs), electricity and gas for heating, cooling and lighting, and cleaning your home office.

You could also separately claim for internet, telephone, stationery and computer consumables and depreciation on items such as computers and laptops.

The only requirement was a record representative of time spent working from home.

For the separately deducted items such as phone and internet expenses, you needed to have receipts or other written evidence of costs, phone accounts to allow you to identify the percentage of work-related usage and a diary for internet usage, and to calculate the percentage use of depreciating assets used exclusively for work.

  • Actual Cost method

As its name states, the Actual Costs Method claims deductions for actual expenses you incur to produce your income when working from home.

These may include the decline in value of depreciating assets (eg. desks and computers), cleaning expenses, if you use a dedicated area for working, heating, cooling and lighting (electricity and gas), phone, data and internet and computer consumables and stationery (eg. printer ink).

These are calculated as the portion of the actual costs, which increase, as a result of you working from home.

Written evidence and receipts of expenses being claimed is required.

CHANGES FOR 2023

  1. 52 cents replaced with 67 cents

From 1 July 2022, a newly released draft ruling allows for a revised fixed rate method with a deduction of 67 cents per hour, to estimate the additional cost incurred when working from home.

The 67 cph rate covers electricity or gas for lighting, heating, cooling and electronic items used while working from home, internet expenses, mobile and home telephone expenses, and stationery and computer consumables.

As above, the 67 cents flat rate does not allow for separate deductions for expenses such as phone and internet. This may ultimately result in a decreased deduction for, unless you opt to use the actual cost method for each work from home related expense item.

How you can claim using this 67c method:

  • The rate per hour calculates the total of your deductible expenses for energy, internet, mobile and/or home telephone and stationery and computer consumables for the income year
  • This means you cannot claim an additional separate deduction for any of these expenses
  • You are not required to have designated work space at home
  • You must keep a record of time spent working from home
    • for the period from 1 July 2022 to 31 December 2022 – a record which is representative of the total number of hours worked from home,
      AND
    • for the period 1 January 2023 to 30 June 2023 – a record of the total number of actual hours you worked from home.
  • keep evidence for additional running costs incurred – such as an invoice, bill or credit card statement, for each of the additional running expenses which you have incurred during the income year. You must keep at least one monthly or quarterly invoice for each of these expenses.
  • Taxpayers will be able to make separate claims for depreciating office equipment and furniture.
  • Items like furniture costing less than $300 can be claimed in one financial year (as was the case with the 52 cent rule).

ESTIMATES NO LONGER ACCEPTED: 

It is important to note that under the new guidelines, an estimate for the entire income year 2023-24 and later years, or an estimate based on the number of hours you work from home during a particular period and applied to the rest of the income year will not be accepted (as it was with previous methods).

A record of your hours for the income year can be in the form of:

timesheets, rosters or a diary or similar document kept contemporaneously.

From 1 July 2022, in order to be able to use the Actual Costs Method, workers will be required to:

  • have designated work area not shared with other areas of the home
  • keep records (eg. receipts or other written evidence) to show the amount:
    • spent on expenses, including the costs of heating and cooling the designated work area
    • spent on depreciating assets you buy and use while working from home
    • of work-related use for your expenses and depreciating assets.

Should you have any questions on the items above, please contact on 02 9923 2959 or mark@mcaccg.com.au

This is general advice only and not to be interpreted as individual advice specific to your situation. Contact us to discuss the best solutions for your needs.”